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Persistent Disparities in Regional Unemployment: Application of a Spatial Filtering Approach to Local Labour Markets in Germany

  • Roberto Patuelli

    ()

    (Institute for Economic Research (IRE), University of Lugano, Switzerland; The Rimini Centre for Economic Analysis, Italy)

  • Norbert Schanne

    ()

    (Institute for Employment Research (IAB), Nuremberg, Germany)

  • Daniel A. Griffith

    ()

    (School of Economic, Political and Policy Sciences, University of Texas at Dallas, USA)

  • Peter Nijkamp

    ()

    (Department of Spatial Economics, VU University Amsterdam, The Netherlands)

The geographical distribution and persistence of regional/local unemployment rates in heterogeneous economies (such as Germany) have been, in recent years, the subject of various theoretical and empirical studies. Several researchers have shown an interest in analysing the dynamic adjustment processes of unemployment and the average degree of dependence of the current unemployment rates or gross domestic product from the ones observed in the past. In this paper, we present a new econometric approach to the study of regional unemployment persistence, in order to account for spatial heterogeneity and/or spatial autocorrelation in both the levels and the dynamics of unemployment. First, we propose an econometric procedure suggesting the use of spatial filtering techniques as a substitute for fixed effects in a panel estimation framework. The spatial filter computed here is a proxy for spatially distributed region-specific information (e.g., the endowment of natural resources, or the size of the ‘home market’) that is usually incorporated in the fixed effects coefficients. The advantages of our proposed procedure are that the spatial filter, by incorporating region-specific information that generates spatial autocorrelation, frees up degrees of freedom, simultaneously corrects for time-stable spatial autocorrelation in the residuals, and provides insights about the spatial patterns in regional adjustment processes. In the paper we present several experiments in order to investigate the spatial pattern of the heterogeneous autoregressive coefficients estimated for unemployment data for German NUTS-3 regions.

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Paper provided by USI Università della Svizzera italiana in its series Quaderni della facoltà di Scienze economiche dell'Università di Lugano with number 1001.

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Length: 28 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:lug:wpaper:1001
Contact details of provider: Web page: https://www.bul.sbu.usi.ch

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  1. J. Paul Elhorst, 2003. "The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 709-748, December.
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  7. Roberto Patuelli & Daniel A. Griffith & Michael Tiefelsdorf & Peter Nijkamp, 2011. "Spatial Filtering and Eigenvector Stability: Space-Time Models for German Unemployment Data," International Regional Science Review, , vol. 34(2), pages 253-280, April.
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