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Regional Differences in the Severity of Recessions in the UK

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Robert Dixon

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Abstract

This paper aims to provide a fresh approach to understanding regional unemployment dynamics and differences. Specifically, we develop a framework to explain differences between regions in the severity (measured in terms of how far unemployment rises) of recessions. The main contribution of this paper is draw attention to the role of the elasticity of the outflow rate with respect to unemployment in determining the severity of recessions. The key parameter of the model - the elasticity of the outflow rate with respect to unemployment - is estimated using regional data for the United Kingdom over the period 1989:1 - 2003:4. This elasticity appears to be higher in the north than the south implying that, for the same percentage increase in inflow, the level (and rate) of unemployment will rise further in northern regions than in southern regions. It follows that, if there has indeed been any reversal of the north-south divide in the United Kingdom as some have claimed, it must have its origins on the inflow, not the outflow, side of the labour market.

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File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp07/1009.pdf
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Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1009.

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Length: 27 pages
Date of creation: 2007
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Handle: RePEc:mlb:wpaper:1009

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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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  1. Burgess, Simon M., 1994. "Matching models and labour market flows," European Economic Review, Elsevier, vol. 38(3-4), pages 809-816, April. [Downloadable!] (restricted)
  2. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June. [Downloadable!] (restricted)
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  3. Fred Lazar, 1977. "Regional Unemployment Rate Disparities in Canada: Some Possible Explanations," Canadian Journal of Economics, Canadian Economics Association, vol. 10(1), pages 112-29, February. [Downloadable!] (restricted)
  4. Robert Dixon & Muhammad Mahmood, 2006. "Hans Singer's model of the severity of recessions," Cambridge Journal of Economics, Oxford University Press, vol. 30(6), pages 835-846, November. [Downloadable!] (restricted)
  5. Balakrishnan, Ravi & Michelacci, Claudio, 2001. "Unemployment dynamics across OECD countries," European Economic Review, Elsevier, vol. 45(1), pages 135-165, January. [Downloadable!] (restricted)
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  6. Stephen Fothergill, 2001. "The True Scale of the Regional Problem in the UK," Regional Studies, Taylor and Francis Journals, vol. 35(3), pages 241-246, May. [Downloadable!] (restricted)
  7. Ron Martin, 1997. "Regional Unemployment Disparities and their Dynamics," Regional Studies, Taylor and Francis Journals, vol. 31(3), pages 237-252, May. [Downloadable!] (restricted)
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