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The evolution of regional unemployment in the EU. An analysis via the Gompertz diffusion process

Author

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  • Stefano Maria IACUS
  • Giuseppe PORRO

Abstract

At the end of Nineties, Danny Quah devoted several papers to the analysis of polarization and stratification in the convergence processes of economies, creating the image of the ``convergence clubs'' and suggesting the importance of studying the distribution dynamics of the macroeconomic variables. As for the labor markets, Overman and Puga (2002) showed that a progressive polarization of unemployment was in fact occurring among the European regions in 1986-1996, causing a phenomenon of cross-border clusterization of the European regions. Here we propose to analyze the evolution of the unemployment rates of the EU27 regions in the last two decades assuming that the unemployment rates evolve according to a Gompertz stochastic process. The estimated parameters of the process - intrinsic growth rate, deceleration factor, volatility - represent the evolutionary path of the unemployment rate and allow for estimating the steady state of the process. A cluster analysis is performed on the steady state values of the unemployment rates. The analysis confirms the emergence of several ``convergence clubs'' among the European regional labor markets, which are compared to the cluster resulting from the more traditional clusterization on the current unemployment rates.

Suggested Citation

  • Stefano Maria IACUS & Giuseppe PORRO, 2012. "The evolution of regional unemployment in the EU. An analysis via the Gompertz diffusion process," Departmental Working Papers 2012-17, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2012-17
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    References listed on IDEAS

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    More about this item

    Keywords

    European regions; regional labor markets; convergence; Gompertz process;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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