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Regional Unemployment in Spain: Disparities, Business Cycle and Wage Setting

  • Roberto Bande


  • Melchor Fernandez

    (University of Santiago de Compostela and IDEGA)

  • Victor Montuenga

    (University of La Rioja)

The existence and persistence of regional disparities is a common problem of many European economies. However, in Spain, this fact exhibits a characteristic feature: a strong positive relationship with the business cycle. The analysis in this paper investigates the relationship between this distinguishing feature of the Spanish economy and changes in the regional wage-setting mechanism, and how this relationship has influenced the aggregate Spanish labour market performance in the recent past. The empirical finding of an important regional imitation effect in wage bargaining may explain both the persistence of disparities and the positive relationship between regional unemployment dispersion and the business cycle. This result has a direct implication on employment policies, which must take into account the regional dimension of the unemployment problem.

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Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Analise Economica with number 0035.

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Length: 38 pages
Date of creation: Nov 2005
Date of revision:
Publication status: Published in Labour Economics, October 2008, pages 885-914
Handle: RePEc:edg:anecon:0035
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