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Adjustment to Regional Labour Market Shocks

  • Aki Kangasharju
  • Sari Pekkala

This paper analyses regional labour market adjustment in the Finnish provinces during 1976-2000. It investigates the inter-relations of employment, unemployment, labour force participation and migration to see how a change in region-specific and total labour demand is adjusted. The analysis reveals that a region-specific labour demand shocks adjust mainly via participation whereas total shocks are adjusted by unemployment. The region-specific component of labour demand shock has shorter-lived effects on unemployment and participation, but its effect on employment is permanent. Conversely, total shocks leave no permanent effect. Migration is more important in the region-specific case where, after a few years, it gets a large role in the adjustment process.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 274.

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Date of creation: 22 May 2002
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Handle: RePEc:fer:dpaper:274
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  1. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
  2. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-55, September.
  3. Aki Kangasharju & Sari Pekkala, 2001. "Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?," ERSA conference papers ersa01p196, European Regional Science Association.
  4. Paolo Mauro & Antonio Spilimbergo, 1998. "How Do the Skilled and the Unskilled Respond to Regional Shocks? the Case of Spain," IMF Working Papers 98/77, International Monetary Fund.
  5. Maria Demertzis & Andrew Hughes Hallett, 1996. "Regional Inequalities and the Business Cycle: An Explanation of the Rise in European Unemployment," Regional Studies, Taylor & Francis Journals, vol. 30(1), pages 15-29.
  6. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  7. Gordon, Ian R, 1985. "The Cyclical Interaction between Regional Migration, Employment and Unemployment: A Time Series Analysis for Scotland," Scottish Journal of Political Economy, Scottish Economic Society, vol. 32(2), pages 135-58, June.
  8. Lourens Broersma & Jouke van Dijk, 2002. "Regional labour market dynamics in the Netherlands," Papers in Regional Science, Springer, vol. 81(3), pages 343-364.
  9. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
  10. Clark, Todd E, 1998. "Employment Fluctuations in U.S. Regions and Industries: The Roles of National, Region-Specific, and Industry-Specific Shocks," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 202-29, January.
  11. Chiara Bentivogli & Patrizio Pagano, 1999. "Regional Disparities and Labour Mobility: the Euro-11 versus the USA," LABOUR, CEIS, vol. 13(3), pages 737-760, 09.
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