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Regional Differences in the Severity of Recessions in the UK

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  • Robert Dixon

Abstract

This paper aims to provide a fresh approach to understanding regional unemployment dynamics and differences. Specifically, we develop a framework to explain differences between regions in the severity (measured in terms of how far unemployment rises) of recessions. The main contribution of this paper is draw attention to the role of the elasticity of the outflow rate with respect to unemployment in determining the severity of recessions. The key parameter of the model - the elasticity of the outflow rate with respect to unemployment - is estimated using regional data for the United Kingdom over the period 1989:1 - 2003:4. This elasticity appears to be higher in the north than the south implying that, for the same percentage increase in inflow, the level (and rate) of unemployment will rise further in northern regions than in southern regions. It follows that, if there has indeed been any reversal of the north-south divide in the United Kingdom as some have claimed, it must have its origins on the inflow, not the outflow, side of the labour market.

Suggested Citation

  • Robert Dixon, 2007. "Regional Differences in the Severity of Recessions in the UK," Department of Economics - Working Papers Series 1009, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1009
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0005/802832/1009.pdf
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    References listed on IDEAS

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    1. Burgess, Simon M., 1994. "Matching models and labour market flows," European Economic Review, Elsevier, vol. 38(3-4), pages 809-816, April.
    2. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June.
    3. R Martin & P Sunley, 1999. "Unemployment flow regimes and regional unemployment disparities," Environment and Planning A, Pion Ltd, London, vol. 31(3), pages 523-550, March.
    4. H. W. Singer, 1939. "Regional Labour Markets and the Process of Unemployment," Review of Economic Studies, Oxford University Press, vol. 7(1), pages 42-58.
    5. Ron Martin, 1997. "Regional Unemployment Disparities and their Dynamics," Regional Studies, Taylor & Francis Journals, vol. 31(3), pages 237-252.
    6. Brian Bell & James Smith, 2002. "On gross worker flows in the United Kingdom: evidence from the Labour Force Survey," Bank of England working papers 160, Bank of England.
    7. Robert Dixon & John Freebairn & Guay Lim, 2003. "Why are recessions as deep as they are? The behaviour over time of the outflow from unemployment: a new perspective," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 37-64, March.
    8. Stephen Fothergill, 2001. "The True Scale of the Regional Problem in the UK," Regional Studies, Taylor & Francis Journals, vol. 35(3), pages 241-246.
    9. Fred Lazar, 1977. "Regional Unemployment Rate Disparities in Canada: Some Possible Explanations," Canadian Journal of Economics, Canadian Economics Association, vol. 10(1), pages 112-129, February.
    10. Balakrishnan, Ravi & Michelacci, Claudio, 2001. "Unemployment dynamics across OECD countries," European Economic Review, Elsevier, vol. 45(1), pages 135-165, January.
    11. Robert Dixon & Muhammad Mahmood, 2006. "Hans Singer's model of the severity of recessions," Cambridge Journal of Economics, Oxford University Press, vol. 30(6), pages 835-846, November.
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