Regional disparities in a small country? An assessment of the regional dimension to the Dutch labour market on the basis of regional unemployment and participation differentials
AbstractThis paper explores regional unemployment and participation data that distinguish gender, age and educational attainment. We observe a panel of 40 Dutch regions over the period 1992 - 2003. Issues such as the national component in regional labour market developments, the role of the labour force composition and persistence of unemployment and participation differentials are considered. A dominance of national unemployment and participation on regional outcomes is found, suggesting a modest regional component to labour market dynamics in the Netherlands. Composition of the potential labour force does not fully account for the remaining differences however. There exists a regional component to unemployment for lower educated, for example. We find that persistence of regional unemployment and participation differentials may be explained to some extent by persistence of regional differences in labour force composition. Persistence of these differentials is strong for lower educated but almost absent for higher educated persons, suggesting that the labour market for the higher educated clears at the national rather than the regional level. Finally, we investigate the effect of unemployment on labour participation. Unlike other recent evidence, our results yield little support for a “discouraged worker effect”. For all population groups, the relationship is statistically insignificant when we control for time-invariant and region-invariant heterogeneity.
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