IDEAS home Printed from https://ideas.repec.org/p/gro/rugsom/00c06.html
   My bibliography  Save this paper

The mystery of regional unemployment differentials : a survey of theoretical and empirical explanations

Author

Listed:
  • Elhorst, J. Paul

    (Groningen University)

Abstract

This paper attempts to provide an integrated overview of theoretical and empirical explanations used in the applied literature on regional unemployment differentials. On the basis of 41 empirical studies, four different model types covering nine theoretical constructs of regional unemployment determination and 13 sets of explanatory variables are identified. The overall conclusion is that theoretical and empirical explanations help to reduce the weaknesses in each other. While theory is found to predict that the regional unemployment rate depends on labour supply factors (a collection of factors which affect natural changes in the labour force, labour force participation, migration and commuting), labour demand factors and wage-setting factors, it is the empirical studies that gain a more profound understanding of the explanatory variables involved. Conversely, whereas most empirical studies provide clear-cut explanations for the signs of the explanatory variables, it is theory that shows that some of these explanations might be out of proportion. By grouping many studies together, this paper shows that there are indeed clear-cut trends.

Suggested Citation

  • Elhorst, J. Paul, 2001. "The mystery of regional unemployment differentials : a survey of theoretical and empirical explanations," Research Report 00C06, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  • Handle: RePEc:gro:rugsom:00c06
    as

    Download full text from publisher

    File URL: http://irs.ub.rug.nl/ppn/240329538
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    2. Olsen, Randall J, 1994. "Fertility and the Size of the U.S. Labor Force," Journal of Economic Literature, American Economic Association, vol. 32(1), pages 60-100, March.
    3. Michelle Baddeley & Ron Martin & Peter Tyler, 1998. "Transitory shock or structural shift? The impact of the early 1980s recession on British regional unemployment," Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 19-30.
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    5. Edward B. Montgomery, 1993. "Pattern in Regional Labor Market Adjustment: The United States vs. Japan," NBER Working Papers 4414, National Bureau of Economic Research, Inc.
    6. Lawrence H. Summers, 1986. "Why is the Unemployment Rate So Very High near Full Employment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 339-396.
    7. Hendry, David F & Mizon, Grayham E, 1978. "Serial Correlation as a Convenient Simplification, not a Nuisance: A Comment on a Study of the Demand for Money by the Bank of England," Economic Journal, Royal Economic Society, vol. 88(351), pages 549-563, September.
    8. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 507-522, June.
    9. Jim Taylor & Steve Bradley, 1994. "Spatial Disparities In The Impact Of The 1990–92 Recession: An Analysis Of Uk Counties," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(4), pages 367-382, November.
    10. Bentolila, Samuel, 1997. "Sticky labor in Spanish regions," European Economic Review, Elsevier, vol. 41(3-5), pages 591-598, April.
    11. Mark Partridge & Dan Rickman, 1997. "The Dispersion of US State Unemployment Rates: The Role of Market and Non-market Equilibrium Factors," Regional Studies, Taylor & Francis Journals, vol. 31(6), pages 593-606.
    12. J. Taylor, "undated". "Regional Problems and Policies: An Overview," Working Papers ec27/90, Department of Economics, University of Lancaster.
    13. Todaro, Michael P., 1976. "Urban job expansion, induced migration and rising unemployment : A formulation and simplified empirical test for LDCs," Journal of Development Economics, Elsevier, vol. 3(3), pages 211-225, September.
    14. I R Gordon & D Lamont, 1982. "A Model of Labour-Market Interdependencies in the London Region," Environment and Planning A, , vol. 14(2), pages 237-264, February.
    15. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    16. Fleisher, Belton M & Rhodes, George, 1976. "Unemployment and the Labor Force Participation of Married Men and Women: A Simultaneous Model," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 398-406, November.
    17. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
    18. R Dunn, 1982. "Parameter instability in models of local unemployment responses," Environment and Planning A, Pion Ltd, London, vol. 14(1), pages 75-94, January.
    19. Ron Martin, 1997. "Regional Unemployment Disparities and their Dynamics," Regional Studies, Taylor & Francis Journals, vol. 31(3), pages 237-252.
    20. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    21. D W Owen & A E Gillespie, 1982. "The Changing Relationship between Local and National Unemployment Rates in Northern England, 1971–1980," Environment and Planning A, , vol. 14(2), pages 183-193, February.
    22. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    23. Reza, Ali M, 1978. "Geographical Differences in Earnings and Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 201-208, May.
    24. Molho, Ian, 1995. "Migrant Inertia, Accessibility and Local Unemployment," Economica, London School of Economics and Political Science, vol. 62(245), pages 123-132, February.
    25. J P Elhorst, 1998. "The nonutilisation of human capital in regional labour markets across Europe," Environment and Planning A, Pion Ltd, London, vol. 30(5), pages 901-920, May.
    26. Curtis J. Simon, 1988. "Frictional Unemployment and the Role of Industrial Diversity," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 715-728.
    27. Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-336, May.
    28. R Dunn, 1982. "Parameter Instability in Models of Local Unemployment Responses," Environment and Planning A, , vol. 14(1), pages 75-94, January.
    29. van der Veen, Anne & Evers, Gerard, 1983. "A simultaneous model for regional labor supply, incorporating labor force participation, commuting and migration," Socio-Economic Planning Sciences, Elsevier, vol. 17(5-6), pages 239-250.
    30. 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.
    31. Burridge, Peter & Gordon, Ian Richard, 1981. "Unemployment in the British Metropolitan Labour Areas," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 274-297, July.
    32. repec:fth:prinin:343 is not listed on IDEAS
    33. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    34. Murphy, Kevin J, 1985. "Geographic Differences in U.S. Unemployment Rates: A Variance Decomposition Approach," Economic Inquiry, Western Economic Association International, vol. 23(1), pages 135-158, January.
    35. Jaakko Pehkonen & Hannu Tervo, 1998. "Persistence and Turnover in Regional Unemployment Disparities," Regional Studies, Taylor & Francis Journals, vol. 32(5), pages 445-458.
    36. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
    37. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    38. I R Gordon, 1985. "Distributed lags in local responses to fluctuations in unemployment," Environment and Planning A, Pion Ltd, London, vol. 17(6), pages 845-856, June.
    39. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    40. Blackaby, D H & Manning, D N, 1992. "Regional Earnings and Unemployment--A Simultaneous Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(4), pages 481-501, November.
    41. Hughes, Gordon & McCormick, Barry & McCormick, Barry, 1987. "Housing markets, unemployment and labour market flexibility in the UK," European Economic Review, Elsevier, vol. 31(3), pages 615-641, April.
    42. D W Owen & A E Gillespie, 1982. "The changing relationship between local and national unemployment rates in Northern England, 1971 - 1980," Environment and Planning A, Pion Ltd, London, vol. 14(2), pages 183-193, February.
    43. Malinvaud,Edmond, 1994. "Diagnosing Unemployment," Cambridge Books, Cambridge University Press, number 9780521445337, December.
    44. Chalmers, James A & Greenwood, Michael J, 1985. "The Regional Labor Market Adjustment Process: Determinants of Changes in Rates of Labor Force Participation, Unemployment, and Migration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 19(1), pages 1-17, March.
    45. D M Hanink, 1988. "Nonintegration of regional labor markets: the case of large US cities from February 1980 through December 1983," Environment and Planning A, Pion Ltd, London, vol. 20(10), pages 1397-1410, October.
    46. Mizon, Grayham E., 1995. "A simple message for autocorrelation correctors: Don't," Journal of Econometrics, Elsevier, vol. 69(1), pages 267-288, September.
    47. George R. Neumann & Robert H. Topel, 1991. "Employment Risk, Diversification, and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1341-1365.
    48. I R Gordon & D Lamont, 1982. "A model of labour-market interdependencies in the London region," Environment and Planning A, Pion Ltd, London, vol. 14(2), pages 237-264, February.
    49. Holzer, Harry J, 1991. "Employment, Unemployment and Demand Shifts in Local Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 25-32, February.
    50. Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-1043, September.
    51. Paldam, Martin, 1987. "How much does one percent of growth change the unemployment rate? : A study of 17 OECD countries, 1948-1985," European Economic Review, Elsevier, vol. 31(1-2), pages 306-313.
    52. D M Hanink, 1988. "Nonintegration of Regional Labor Markets: The Case of Large US Cities from February 1980 through December 1983," Environment and Planning A, , vol. 20(10), pages 1397-1410, October.
    53. Pissarides, Christopher A & McMaster, Ian, 1990. "Regional Migration, Wages and Unemployment: Empirical Evidence and Implications for Policy," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 812-831, October.
    54. James D. Adams, 1985. "Permanent Differences in Unemployment and Permanent Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 29-56.
    55. Stephen T. Marston, 1985. "Two Views of the Geographic Distribution of Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 57-79.
    56. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    57. Ghatak, Subrata & Levine, Paul & Price, Stephen Wheatley, 1996. " Migration Theories and Evidence: An Assessment," Journal of Economic Surveys, Wiley Blackwell, vol. 10(2), pages 159-198, June.
    58. Frank Brechling, 1967. "Trends And Cycles In British Regional Unemployment," Oxford Economic Papers, Oxford University Press, vol. 19(1), pages 1-21.
    59. Evans, Philip & McCormick, Barry, 1994. "The New Pattern of Regional Unemployment: Causes and Policy Significance," Economic Journal, Royal Economic Society, vol. 104(424), pages 633-647, May.
    60. Taylor, Jim & Bradley, Steve, 1997. "Unemployment in Europe: A Comparative Analysis of Regional Disparities in Germany, Italy and the UK," Kyklos, Wiley Blackwell, vol. 50(2), pages 221-245.
    61. A. P. Thirlwall, 1966. "Regional Unemployment As A Cyclical Phenomenon1," Scottish Journal of Political Economy, Scottish Economic Society, vol. 13(2), pages 205-219, June.
    62. Wayne Simpson, 1987. "Workplace Location, Residential Location, and Urban Commuting," Urban Studies, Urban Studies Journal Limited, vol. 24(2), pages 119-128, April.
    63. I R Gordon, 1985. "Distributed Lags in Local Responses to Fluctuations in Unemployment," Environment and Planning A, , vol. 17(6), pages 845-856, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. López-Hernández, Fernando A., 2013. "Second-order polynomial spatial error model. Global and local spatial dependence in unemployment in Andalusia," Economic Modelling, Elsevier, vol. 33(C), pages 270-279.
    2. Böckerman, Petri, 2002. "Understanding Regional Productivity in a Nordic Welfare State: Does ICT Matter?," Discussion Papers 798, The Research Institute of the Finnish Economy.
    3. Floro Ernesto Caroleo & Gianluigi Coppola, 2006. "The Impact of the Institutions on Regional Unemployment Disparities in Europe," Discussion Papers 4_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    4. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, June.
    5. Hasan Engin Duran, 2015. "Regional Employment Volatility In Turkey: Causes And Consequences," Working Papers 2015/06, Turkish Economic Association.
    6. International Monetary Fund, 2012. "Belgium; Selected Issues Paper," IMF Staff Country Reports 12/56, International Monetary Fund.
    7. Niebuhr, Annekatrin, 2002. "Spatial dependence of regional unemployment in the European Union," HWWA Discussion Papers 186, Hamburg Institute of International Economics (HWWA).
    8. Niebuhr, Annekatrin, 2002. "Spatial Dependence of Regional Unemployment in the European Union," Discussion Paper Series 26147, Hamburg Institute of International Economics.
    9. Roberto Ezcurra, 2011. "Unemployment Volatility and Regional Specialization in the European Union," Regional Studies, Taylor & Francis Journals, vol. 45(8), pages 1121-1137.
    10. Petri Böckerman & Kari Hämäläinen & Mika Maliranta, 2004. "Sources of Job and Worker Flows: Evidence from a Panel of Regions," LABOUR, CEIS, vol. 18(1), pages 105-129, March.
    11. Floro Ernesto Caroleo & Gianluigi Coppola, 2005. "The impact of institutions on Regional unemployment disparities," ERSA conference papers ersa05p758, European Regional Science Association.
    12. David C Maré & Wai Kin Choy, 2001. "Regional Labour Market Adjustment and the Movements of People: A Review," Treasury Working Paper Series 01/08, New Zealand Treasury.
    13. Ines Murillo & Fernando Núñez & Carlos Usabiaga, 2005. "Differentials and persistence in unemployment - an analysis of the Spanish regions with the highest unemployment rates," ERSA conference papers ersa05p278, European Regional Science Association.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gro:rugsom:00c06. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hanneke Tamling). General contact details of provider: http://edirc.repec.org/data/ferugnl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.