Several studies have documented the weak response of regional wages differentials and labour mobility following region-specific ("idiosyncratic") shocks in the average of the EU countries. This has been often taken as evidence of the rigidity of labour markets in European countries, as opposed to the flexbility of the USA. However, as such shocks by definition average to zero, one cannot make an explicit kink between the (lack of) adjustment at regional level and aggregate unemployment. This paper tries to provide a better understanding of the regional distribution of unemployment and why region-specific shocks can matter aggregate unemployment.
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Paper provided by Commission of the EC, Directorate-General for Economic and Financial Affairs (DG ECFIN) in its series European Economy - Economic Papers with number
134.
Find related papers by JEL classification: J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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