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From progress to nightmare - European regional unemployment over time

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Abstract

We analyze the distribution of regional unemployment in Europe over the last three decades using non-parametric kernel densities and stochastic kernels. In addition, we employ a multi-level factor model to separate European, country, and region-specific unemployment fluctuations. Three phases of distributional change of EU relative unemployment rates are detected: they polarized from 1986 to 1996, converged after the introduction of the Euro and have been polarizing again since the outbreak of the financial crisis, having reached the highest levels ever. We find that European fluctuations account for roughly two fifths of the total variance confirming the existence of a European unemployment cycle. Country fluctuations are equally important, which leaves one fifth to be explained by region-specific movements. German regions are found to respond negatively to the European factor and country movements cause diverse responses in particular in Italy and England. The convergence prior to 2007 can be attributed to country affects and the divergence thereafter both to country and region-specific factors. Finally, we also discuss within country heterogeneity.

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  • Robert Beyer & Michael Stemmer, 2015. "From progress to nightmare - European regional unemployment over time," DNB Working Papers 458, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:458
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    1. Comment ont évolué les taux de chômage des régions européennes ?
      by Martin Anota in D'un champ l'autre on 2015-02-25 03:40:28

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    Cited by:

    1. Beyer, Robert C.M. & Stemmer, Michael A., 2016. "Polarization or convergence? An analysis of regional unemployment disparities in Europe over time," Economic Modelling, Elsevier, vol. 55(C), pages 373-381.
    2. Smets, Frank & Beyer, Robert C. M., 2015. "Labour market adjustments in Europe and the US: How different?," Working Paper Series 1767, European Central Bank.

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    More about this item

    Keywords

    unemployment; European regions; distribution dynamics; multi-level factor model;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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