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Interregional differences in labor market participation

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  • Joachim Möller
  • Alisher Aldashev

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Abstract

The paper analyzes the variation of gender-specific labor-market participation rates at the regional level. We first develop a search-theoretical model with inter-temporal optimization behavior of agents. The model suggests that a higher regional wage level fosters participation, while higher job insecurity as measured by the unemployment rate discourages workers. Moreover, a high wage dispersion increases the value of search and should lead to higher participation rates. Using a spatial econometric approach we investigate the determinants of gender-specific participation in a comprehensive empirical model where differences between West and East Germany are explicitly accounted for. We generally find that variation in regional participation rates in driven by economic forces. Unemployment depresses labor-market participation of male and female workers in both parts of the country, while a higher wage level stimulates it. This is in line with theoretical predictions. However, contrary to the implications of a model with risk-neutral individuals, our results show that higher wage dispersion in the left tail of the wage distribution tends to lower participation. We conclude that the inter-temporal search-theoretical framework assuming risk-neutral individuals is not able to cover all major aspects of participation behavior. Copyright Springer-Verlag 2006

Suggested Citation

  • Joachim Möller & Alisher Aldashev, 2006. "Interregional differences in labor market participation," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 26(1), pages 25-50, March.
  • Handle: RePEc:spr:jahrfr:v:26:y:2006:i:1:p:25-50
    DOI: 10.1007/s10037-005-0076-3
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2009. "Identifikation von Förderregionen in der “Gemeinschaftsaufgabe” Identification of assisted areas in the “Gemeinschaftsaufgabe”," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 29(1), pages 65-83, February.
    2. Yolanda Pena-Boquete, 2016. "Further developments in the dynamics of female labour force participation," Empirical Economics, Springer, vol. 50(2), pages 463-501, March.
    3. Joachim Möller, 2009. "Regional variations in the price of building land: a spatial econometrics approach for West Germany," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 113-132, March.
    4. Fuchs, Johann & Weber, Brigitte, 2010. "Umfang und Struktur der westdeutschen Stillen Reserve : Aktualisierte Schätzungen (Extent and structure of the hidden labour force in Western German)," IAB-Forschungsbericht 201011, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    Regional participation behavior; search models; wage inequality; German unification; spatial econometrics; spatial weight matrix; J21; R23;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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