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Regional Unemployment in Spain: Disparities, Business Cycle and Wage Setting

Author

Listed:
  • Roberto Bande
  • Melchor Fernandez

    (University of Santiago de Compostela and IDEGA)

  • Victor Montuenga

    (University of La Rioja)

Abstract

The existence and persistence of regional disparities is a common problem of many European economies. However, in Spain, this fact exhibits a characteristic feature: a strong positive relationship with the business cycle. The analysis in this paper investigates the relationship between this distinguishing feature of the Spanish economy and changes in the regional wage-setting mechanism, and how this relationship has influenced the aggregate Spanish labour market performance in the recent past. The empirical finding of an important regional imitation effect in wage bargaining may explain both the persistence of disparities and the positive relationship between regional unemployment dispersion and the business cycle. This result has a direct implication on employment policies, which must take into account the regional dimension of the unemployment problem.

Suggested Citation

  • Roberto Bande & Melchor Fernandez & Victor Montuenga, 2005. "Regional Unemployment in Spain: Disparities, Business Cycle and Wage Setting," Documentos de trabajo - Analise Economica 0035, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    • Handle: RePEc:edg:anecon:0035
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