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Regional unemployment and productivity in Europe

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  • Roberto Basile
  • Luca De Benedictis

Abstract

. We analyse the relationship between regional unemployment and labour productivity in Europe, basing our empirical analysis on the predictions of a Neary‐type General Oligopolistic Equilibrium trade model with efficiency‐wages. Using semiparametric and dynamic panel data estimators and controlling for other factors, we give evidence of a nonlinear relationship between productivity and regional unemployment in Europe: with a level of productivity smaller than a certain threshold, this relationship is negative, while no relation occurs in the case of higher productivity regions. This evidence proves an important role of a wage‐floor (induced by efficiency wages and exacerbated by institutional factors) under which the productivity gap cannot be compensated by a wage gap. Resumen. Analizamos la relación entre el desempleo regional y la productividad laboral en Europa, tomando como base de nuestro análisis empírico las predicciones de un modelo de comercio general oligopolístico de equilibrio tipo Neary con salarios eficientes. Mediante el uso de estimadores semiparamétricos y datos de panel dinámicos y control de otros factores, proporcionamos evidencia de una relación no lineal entre la productividad y el desempleo regional en Europa: con un nivel de productividad por debajo de un cierto valor umbral, esta relación es negativa, mientras que no existe esta relación en el caso de regiones con productividad mas elevada. Esta evidencia prueba el papel importante de una base salarial (inducida por salarios eficientes y exacerbada por factores institucionales) por debajo de la cual la diferencia de productividad no puede ser compensada por una diferencia salarial.

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  • Roberto Basile & Luca De Benedictis, 2008. "Regional unemployment and productivity in Europe," Papers in Regional Science, Wiley Blackwell, vol. 87(2), pages 173-192, June.
    • Handle: RePEc:bla:presci:v:87:y:2008:i:2:p:173-192
    DOI: 10.1111/j.1435-5957.2007.00152.x
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    1. Roberto Bande Ramudo & Melchor Fernández Fernández & Víctor Montuenga Gómez, 2011. "Wage flexibility and local labour markets: homogeneity of the wage curve in Spain," Documentos de trabajo - Analise Economica 0044, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    2. 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.
    3. Enrico Marelli & Roberto Patuelli & Marcello Signorelli, 2012. "Regional unemployment in the EU before and after the global crisis," Post-Communist Economies, Taylor & Francis Journals, vol. 24(2), pages 155-175, January.
    4. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.
    5. Jozef Konings & Luca Marcolin, 2014. "Do wages reflect labor productivity? The case of Belgian regions," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-21, December.
    6. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing Limited, vol. 32(3), pages 273-299, June.
    7. María Hierro, 2009. "Modelling the dynamics of internal migration flows in Spain," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 683-692, August.
    8. Elias Giannakis & Theofanis P. Mamuneas, 2022. "Labour productivity and regional labour markets resilience in Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(3), pages 691-712, June.
    9. Tomáš Volek & Martina Novotná, 2015. "Gross Value Added and Total Factor Productivity In Czech Sectors," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(1), March.
    10. Vicente Rios Ibañez, 2014. "What drives regional unemployment convergence?," ERSA conference papers ersa14p924, European Regional Science Association.
    11. Don J. Webber & John Hudson & Martin Boddy & Anthony Plumridge, 2009. "Regional productivity differentials in England: Explaining the gap," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 609-621, August.
    12. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    13. Giuseppe Arbia, 2011. "A Lustrum of SEA: Recent Research Trends Following the Creation of the Spatial Econometrics Association (2007--2011)," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(4), pages 377-395, July.
    14. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
    15. Adriana Di Liberto & Stefano Usai, 2011. "TFP convergence across European regions," ERSA conference papers ersa10p409, European Regional Science Association.
    16. Uwe Blien & Stefan Fuchs & Georg Hirte, 2013. "New advances in the analysis of regional labour markets," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 243-248, June.
    17. Demidova, Olga & Marelli, Enrico & Signorelli, Marcello, 2015. "Youth labour market performances in the Russian and Italian regions," Economic Systems, Elsevier, vol. 39(1), pages 43-58.

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