IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Regional Unemployment Disparities: An Evaluation of Policy Measures

  • Nicolaas Groenewold

    (UWA Business School, The University of Western Australia)

  • Alfred Hagger

    (School of Economics, The University of Tasmania)

Registered author(s):

    This paper analyses the efficacy of regional and federal government policies in reducing inter-regional unemployment disparities. We use as our framework a two-region general equilibrium model with a given freely-mobile supply of labour. We assume interregional migration to occur in response to inter-regional utility differentials. Each region has households, firms and a regional government. In addition to regional governments, there is a federal government. The firms in a region use a single factor, labour, to produce a single good which we assume to be different to that produced in the other region. It is supplied to households and to the regional government in the form of payroll taxes. Households consume some, trade some with households in the other region and give some up to the federal government as income tax. Firms and households bargain over wages and firms then choose employment to maximise profits. The resulting equilibrium will generally not be a full-employment one. We simulate a linearised numerical version of the model. We examine seven alternative policies, six carried out by a regional government and one by the federal government. In the first group there are traditional tax/expenditure polices as well as policies which might be seen as attacking the natural rate of unemployment: changes in unemployment benefits, changes in union power, changes in the labour force and changes in labour productivity. The federal government policy is a regionally- differentiated fiscal policy. Contrary to expectations, many policies which have traditionally been recommended to alleviate unemployment, are found, in fact, to exacerbate the unemployment problem.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 07-05.

    in new window

    Length: 38 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:uwa:wpaper:07-05
    Contact details of provider: Postal: 35 Stirling Highway, Crawley, W.A. 6009
    Phone: (08) 9380 2918
    Fax: (08) 9380 1016
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Nicolaas Groenewold & Alfred J. Hagger & John R. Madden, 2001. "Competitive Federalism: A Political-Economy General Equilibrium Approach," Economics Discussion / Working Papers 01-10, The University of Western Australia, Department of Economics.
    2. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
    3. Petchey, Jeffrey D, 1993. "Equalisation in a Federal Economy with Inter-state Migration," Australian Economic Papers, Wiley Blackwell, vol. 32(61), pages 336-54, December.
    4. repec:kap:jeczfn:v:82:y:2003:i:4:p:535-554 is not listed on IDEAS
    5. McGuire, P, 2001. "Regional unemployment in Queensland: Dimensions and policy issues," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 27(4), pages 296-313.
    6. A. P. Thirlwall, 1966. "Regional Unemployment As A Cyclical Phenomenon1," Scottish Journal of Political Economy, Scottish Economic Society, vol. 13(2), pages 205-219, 06.
    7. Dixon, Robert & Shepherd, David, 2001. "Trends and Cycles in Australian State and Territory Unemployment Rates," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 252-69, September.
    8. Guy Debelle & James Vickery, 1999. "Labour Market Adjustment: Evidence on Interstate LabourMobility," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 32(3), pages 249-263.
    9. Gordon, Ian, 1979. "Regional Unemployment Elasticities: The Neglected Role of Migration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 26(1), pages 97-101, February.
    10. Bell, David N F, 1981. "Regional Output: Employment and Unemployment Fluctuations," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 42-60, March.
    11. Nicolaas Groenewold & Alfred Hagger & John Madden, 2003. "Interregional transfers: A political-economy CGE approach," Economics of Governance, Springer, vol. 82(4), pages 535-554, November.
    12. Gavin Cameron & John Muellbauer, 2001. "Earnings, unemployment, and housing in Britain," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 203-220.
    13. Petchey, Jeffrey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(215), pages 343-53, December.
    14. Elias, D Peter B, 1980. "Regional Unemployment Differentials: A Restatement of the Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 27(1), pages 103-05, February.
    15. Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
    16. Madden, John Robert & Groenewold, Nicolaas & Hagger, Alfred James, 2000. "Competitive Federalism: A Bargain-Theoretic General Equilibrium Approach," ERSA conference papers ersa00p425, European Regional Science Association.
    17. Elias, D Peter B, 1979. "Regional Unemployment Elasticities: Migration or Registration?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 26(1), pages 103-06, February.
    18. Gordon, Ian, 1980. "Regional Unemployment Differentials: Migration not Registration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 27(1), pages 97-102, February.
    19. Elias, D Peter B, 1978. "Regional Unemployment Elasticities: Further Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 25(1), pages 89-96, February.
    20. Dixon, R. & Shepherd, D. & Thomson, J., 2000. "Regional Unemployment Disparities," Department of Economics - Working Papers Series 737, The University of Melbourne.
    21. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, July.
    22. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2001. "Widening differences in Italian regional unemployment," Labour Economics, Elsevier, vol. 8(1), pages 103-129, January.
    23. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November.
    24. Jaakko Pehkonen & Hannu Tervo, 1998. "Persistence and Turnover in Regional Unemployment Disparities," Regional Studies, Taylor & Francis Journals, vol. 32(5), pages 445-458.
    25. Petchey, Jeffrey & Shapiro, Perry, 2000. "The Efficiency of State Taxes on Mobile Labour Income," The Economic Record, The Economic Society of Australia, vol. 76(234), pages 285-96, September.
    26. Petchey, Jeffrey D & Shapiro, Perry, 2002. "State Tax and Policy Competition for Mobile Capital," The Economic Record, The Economic Society of Australia, vol. 78(241), pages 175-85, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:uwa:wpaper:07-05. 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: (Verity Chia)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.