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Thresholds for employment and unemployment: A spatial analysis of German regional labour markets, 1992-2000

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  • Reinhold Kosfeld
  • Christian Dreger

Abstract

This paper applies Verdoorn's and Okun's law to derive efficient estimates of the employment and unemployment threshold in the Unified Germany. The analysis is built on a disaggregated dataset of regional labour markets, where spatial dependencies are taken into account. Especially, a spatial SUR model is proposed utilising the eigenfunction decomposition approach suggested by Griffith (1996, 2000). The thresholds turn out to be unstable over time. However, minimum output growth sufficient for a rise in employment is below the level needed for a drop in the unemployment rate. If spatial effects are ignored, the thresholds seem to be markedly overrated. Copyright (c) 2006 the author(s). Journal compilation (c) 2006 RSAI.

Suggested Citation

  • Reinhold Kosfeld & Christian Dreger, 2006. "Thresholds for employment and unemployment: A spatial analysis of German regional labour markets, 1992-2000," Papers in Regional Science, Wiley Blackwell, vol. 85(4), pages 523-542, November.
  • Handle: RePEc:bla:presci:v:85:y:2006:i:4:p:523-542
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    1. Freeman, Donald G, 2001. "Panel Tests of Okun's Law for Ten Industrial Countries," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 511-523, October.
    2. Cecchetti, Stephen G & Rich, Robert W, 2001. "Structural Estimates of the U.S. Sacrifice Ratio," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 416-427, October.
    3. Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-336, May.
    4. Rowthorn, R E, 1979. "A Note on Verdoorn's Law," Economic Journal, Royal Economic Society, vol. 89(353), pages 131-133, March.
    5. Bernard Fingleton, 2000. "Spatial econometrics, economic geography, dynamics and equilibrium: a 'third way'?," Environment and Planning A, Pion Ltd, London, vol. 32(8), pages 1481-1498, August.
    6. Kaldor, Nicholas, 1975. "Economic Growth and the Verdoorn Law-A Comment on Mr. Rowthorn's Article," Economic Journal, Royal Economic Society, vol. 85(340), pages 891-896, December.
    7. Moosa, Imad A., 1997. "A Cross-Country Comparison of Okun's Coefficient," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 335-356, June.
    8. M Tiefelsdorf & B Boots, 1995. "The Exact Distribution of Moran's I," Environment and Planning A, , vol. 27(6), pages 985-999, June.
    9. Lee, Jim, 2000. "The Robustness of Okun's Law: Evidence from OECD Countries," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 331-356, April.
    10. Jordi Pons-Novell & Elisabet Viladecans-Marsal, 1999. "Kaldor's Laws and Spatial Dependence: Evidence for the European Regions," Regional Studies, Taylor & Francis Journals, vol. 33(5), pages 443-451.
    11. Bernard Fingleton, 2001. "Equilibrium and Economic Growth: Spatial Econometric Models and Simulations," Journal of Regional Science, Wiley Blackwell, vol. 41(1), pages 117-147.
    12. Attfield, Clifford L. F. & Silverstone, Brian, 1998. "Okun's Law, Cointegration and Gap Variables," Journal of Macroeconomics, Elsevier, vol. 20(3), pages 625-637, July.
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    Cited by:

    1. Roberto Patuelli & Norbert Schanne & Daniel A. Griffith & Peter Nijkamp, 2012. "Persistence Of Regional Unemployment: Application Of A Spatial Filtering Approach To Local Labor Markets In Germany," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 300-323, May.
    2. Martinho, Vítor João Pereira Domingues, 2011. "What the keynesian theory said about Portugal?," MPRA Paper 32610, University Library of Munich, Germany.
    3. Ulrich Zierahn, 2012. "The importance of spatial autocorrelation for regional employment growth in Germany," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 32(1), pages 19-43, March.
    4. Guisinger, Amy Y. & Hernandez-Murillo, Ruben & Owyang, Michael T. & Sinclair, Tara M., 2018. "A state-level analysis of Okun's law," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 239-248.
    5. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2007. "Regionale Entwicklung mit und ohne räumliche Spillover-Effekte," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 27(1), pages 23-42, February.
    6. Marta Yánez Contreras & Marta Yánez Contreras, 2010. "El mercado laboral desde una perspectiva espacial," REVISTA APUNTES DEL CENES, UNIVERSIDAD PEDAGOGICA Y TECNOLOGICA DE COLOMBIA, September.
    7. Nikolay Kaledin, 2013. "Societal geography and regionalization of society," ERSA conference papers ersa13p1334, European Regional Science Association.
    8. Eckey, Hans-Friedrich & Döring, Thomas & Türck, Matthias, 2006. "Convergence of regions from 23 EU member states," Volkswirtschaftliche Diskussionsbeiträge 86, University of Kassel, Faculty of Economics and Management.
    9. Celia Melguizo, 2017. "An analysis of Okun’s law for the Spanish provinces," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 37(1), pages 59-90, February.
    10. Herwartz, Helmut & Niebuhr, Annekatrin, 2011. "Regional labor demand and national labor market institutions in the EU15," HWWI Research Papers 112, Hamburg Institute of International Economics (HWWI).
    11. Phiri, Andrew, 2014. "Re-evaluating Okun's law in South Africa: A nonlinear co-integration approach," MPRA Paper 57398, University Library of Munich, Germany.
    12. Roberto Patuelli & Daniel A. Griffith & Michael Tiefelsdorf & Peter Nijkamp, 2009. "Spatial Filtering and Eigenvector Stability: Space-Time Models for German Unemployment Data," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0902, USI Università della Svizzera italiana.
    13. repec:eee:regeco:v:67:y:2017:i:c:p:42-49 is not listed on IDEAS
    14. repec:lrk:eeaart:35_2_6 is not listed on IDEAS

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