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Regional Matching Frictions and Aggregate Unemployment

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  • Sanna-Mari Hynninen

    ()

  • Aki Kangasharju

    ()

  • Jaakko Pehkonen

    ()

Abstract

The study shows that a stochastic frontier approach applied to regional level data offers a convenient and interesting method to examine how regional differences in matching efficiency and structural factors contribute to aggregate unemployment. The study finds notable and time-wise stable differences in the matching efficiency across travel-to-work areas in Finland. If all areas were as efficient as the most efficient one, the number of hires would increase about 40 per cent. This would decrease the aggregate unemployment rate from the current 8.5 percent level to 6.0 per cent. If all the areas shared the same structural characteristics as the most favourable area, the aggregate unemployment rate would drop to 7.1 per cent.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p416.

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Date of creation: Aug 2006
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Handle: RePEc:wiw:wiwrsa:ersa06p416

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  10. Blanchard, J.O., 1989. "The Aggregate Matching Function," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 538, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Aki Kangasharju & Jaakko Pehkonen & Sari Pekkala, 2005. "Returns to scale in a matching model: evidence from disaggregated panel data," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(1), pages 115-118.
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  13. Pekka Ilmakunnas & Hanna Pesola, 2003. "Regional Labour Market Matching Functions and Efficiency Analysis," LABOUR, CEIS, CEIS, vol. 17(3), pages 413-437, 09.
  14. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, Springer, vol. 20(2), pages 325-32.
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Cited by:
  1. Anis Bou Abid & Imed Drine, 2010. "Efficiency Frontier and Matching Process on the Labour Market: Evidence from Tunisia," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) wp2010-123, World Institute for Development Economic Research (UNU-WIDER).

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