IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa03p44.html
   My bibliography  Save this paper

Increasing Returns and Spatial Unemployment Disparities

Author

Listed:
  • Jens Suedekum

    ()

Abstract

Regional differences in unemployment rates in the EU, both within and across member countries, are far more pronounced than regional income disparities. Yet, standard models of the new trade and location theories (new economic geography, new trade theory etc.) usually assume full employment and can thus not provide a coherent explanation for spatial unemployment differences. Regional labour market theories like the ´wage curve´-approach on the other hand fail to account for regional agglomeration of economic activity, which is one of the most salient features of the spatial economic structure in the EU. The model in this paper analyses regional agglomeration and regional unemployment in an unified approach, as it combines a wage curve with a technology exhibiting localised increasing returns to scale. The main result of the paper is the prediction that regional unemployment rates closely resemble the core-periphery structure of regional incomes per capita. This matches the stylised facts about the geographical configuration of production and employment in the EU.

Suggested Citation

  • Jens Suedekum, 2003. "Increasing Returns and Spatial Unemployment Disparities," ERSA conference papers ersa03p44, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa03p44
    as

    Download full text from publisher

    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa03/cdrom/papers/44.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, March.
    2. Sato, Yasuhiro, 2000. "Search theory and the wage curve," Economics Letters, Elsevier, vol. 66(1), pages 93-98, January.
    3. Ron Martin, 1997. "Regional Unemployment Disparities and their Dynamics," Regional Studies, Taylor & Francis Journals, vol. 31(3), pages 237-252.
    4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    5. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, March.
    6. Ludema, Rodney D. & Wooton, Ian, 2000. "Economic geography and the fiscal effects of regional integration," Journal of International Economics, Elsevier, vol. 52(2), pages 331-357, December.
    7. Mariassunta Giannetti, 2001. "Skill Complementarities and Migration Decisions," LABOUR, CEIS, vol. 15(1), pages 1-31, March.
    8. Elhorst, J. Paul, 2000. "The Mystery Of Regional Unemployment Differentialsa Survey Of Theoretical And Empirical Explanations," ERSA conference papers ersa00p60, European Regional Science Association.
    9. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    10. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    11. Henry G. Overman & Diego Puga, 2002. "Unemployment clusters across Europe's regions and countries," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 115-148, April.
    12. Robert E. Hall, 1972. "Turnover in the Labor Force," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(3), pages 709-764.
    13. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    14. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    15. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    16. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    17. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, August.
    18. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    19. Ron Martin & Peter Tyler, 2000. "Regional Employment Evolutions in the European Union: A Preliminary Analysis," Regional Studies, Taylor & Francis Journals, vol. 34(7), pages 601-616, October.
    20. Jens Suedekum, 2004. "Selective migration, union wage setting and unemployment disparities in West Germany," International Economic Journal, Taylor & Francis Journals, vol. 18(1), pages 33-48.
    21. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    22. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
    23. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
    24. Robert E. Hall, 1970. "Why Is the Unemployment Rate So High at Full Employment?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 369-410.
    25. Möller, Joachim & Haas, Anette, 2002. "The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997," ERSA conference papers ersa02p327, European Regional Science Association.
    26. Addison John T. & Teixeira Paulino, 2001. "Employment Adjustment in a “Sclerotic” Labour Market: Comparing Portugal with Germany, Spain, and the United Kingdom / Beschäftigungsanpassung in einem „sklerotischen“ Arbeitsmarkt: Ein Vergleich von ," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(4), pages 353-370, August.
    27. Jan K. Brueckner & Yves Zenou, 2003. "Space and Unemployment: The Labor-Market Effects of Spatial Mismatch," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 242-262, January.
    28. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    29. Carlin, Wendy & Soskice, David, 1990. "Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate," OUP Catalogue, Oxford University Press, number 9780198772446.
    30. Olympia Bover & Pilar García-Perea & Pedro Portugal, 2000. "Labour market outliers: Lessons from Portugal and Spain," Economic Policy, CEPR;CES;MSH, vol. 15(31), pages 379-428, October.
    31. Reichlin, Pietro & Rustichini, Aldo, 1998. "Diverging patterns with endogenous labor migration," Journal of Economic Dynamics and Control, Elsevier, vol. 22(5), pages 703-728, May.
    32. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
    33. Partridge, Mark D. & Rickman, Dan S., 1997. "Has the wage curve nullified the Harris-Todaro model? Further US evidence," Economics Letters, Elsevier, vol. 54(3), pages 277-282, July.
    34. Bahnmüller, Reinhard & Bispinck, Reinhard & Weiler, Anni, 1999. "Tarifpolitik und Lohnbildung in Deutschland: Am Beispiel ausgewählter Wirtschaftszweige," WSI Working Papers 79, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
    35. Giuseppe Bertola, 2000. "Labour markets in the European Union : the European unemployment problem," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(1), pages 9-11, October.
    36. Tabuchi, Takatoshi, 1998. "Urban Agglomeration and Dispersion: A Synthesis of Alonso and Krugman," Journal of Urban Economics, Elsevier, vol. 44(3), pages 333-351, November.
    37. Lindbeck, Assar, 1992. "Macroeconomic theory and the labor market," European Economic Review, Elsevier, vol. 36(2-3), pages 209-235, April.
    38. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    39. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    40. Forslid, Rikard, 1999. "Agglomeration with Human and Physical Capital: an Analytically Solvable Case," CEPR Discussion Papers 2102, C.E.P.R. Discussion Papers.
    41. 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.
    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. Blien, Uwe & Sanner, Helge, 2006. "Structural change and regional employment dynamics," IAB Discussion Paper 200606, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Jelena Sisinacki & Ivana Rasic & Valerija Botric, 2004. "Comparative analysis of regional unemployment and RGDP in Croatia and selected transition countries," ERSA conference papers ersa04p132, European Regional Science Association.
    3. Hartmut Egger & Peter Egger & James R. Markusen, 2012. "International Welfare And Employment Linkages Arising From Minimum Wages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 771-790, August.
    4. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing, vol. 32(3), pages 273-299, June.
    5. Blien, Uwe & Messmann, Susanne & Trappmann, Mark, 2012. "Do reservation wages react to regional unemployment?," IAB Discussion Paper 201222, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Garcilazo, Jose Enrique & Spiezia, Vincenzo, 2007. "Regional Unemployment Clusters: Neighborhood and State Effects in Europe and North America," The Review of Regional Studies, Southern Regional Science Association, vol. 37(3), pages 282-302.
    7. Anna Maria Ferragina & Francesco Pastore, 2008. "Mind The Gap: Unemployment In The New Eu Regions," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 73-113, February.
    8. Salvatore Barbaro & Jens Südekum, 2004. "Reforming a complicated income tax system: The political economics perspective," Departmental Discussion Papers 120, University of Goettingen, Department of Economics.
    9. Petra Enß & Robert Schwager, 2006. "Kommunaler Finanzausgleich und Gewerbesteuerhebesätze in Niedersachsen," Departmental Discussion Papers 127, University of Goettingen, Department of Economics.
    10. Ana María Díaz, 2016. "Spatial Unemployment Differentials in Colombia," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, vol. 76, February.
    11. Heid, Benedikt & Larch, Mario, 2012. "Migration, trade and unemployment," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-40.
    12. vom Berge, Philipp, 2011. "Search Unemployment and New Economic Geography," University of Regensburg Working Papers in Business, Economics and Management Information Systems 454, University of Regensburg, Department of Economics.
    13. Oliver Lerbs, 2011. "Is there a link between homeownership and unemployment? Evidence from German regional data," International Economics and Economic Policy, Springer, vol. 8(4), pages 407-426, December.
    14. Wrede, Matthias, 2012. "Wages, rents, unemployment, and the quality of life," FAU Discussion Papers in Economics 01/2012 [rev.], Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    15. Joanna Tyrowicz & Piotr Wojcik, 2011. "Nonlinear Stochastic Convergence Analysis of Regional Unemployment Rates in Poland," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(1), pages 59-79, July.
    16. Roberts, Mark & Deichmann, Uwe & Fingleton, Bernard & Shi, Tuo, 2010. "On the road to prosperity ? The economic geography of China's national expressway network," Policy Research Working Paper Series 5479, The World Bank.
    17. Karoly Fazekas & Jeno Koltay (ed.), 2004. "The Hungarian Labour Market 2004," The Hungarian Labour Market Yearbooks, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, number 2004.
    18. Cristina Lincaru & Vasilica Ciucã, 2011. "The Geographical Distribution Of Unemployment At Localities Desegregation Level.Case Study For South Muntenia Region - Romania," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 5(2), pages 76-91, DECEMBER.
    19. Sascha Wolff, 2006. "Migration und ihre Determinanten im ost-westdeutschen Kontext nach der Wiedervereinigung: Ein Literaturüberblick," Departmental Discussion Papers 130, University of Goettingen, Department of Economics.
    20. Renate Ohr, 2009. "European Monetary Union at Ten: Had the German Maastricht Critics Been Wrong?," Departmental Discussion Papers 141, University of Goettingen, Department of Economics.
    21. Kondo, Keisuke, 2015. "Spatial persistence of Japanese unemployment rates," Japan and the World Economy, Elsevier, vol. 36(C), pages 113-122.
    22. Thies Büttner & Robert Schwager, 2003. "Regionale Verteilungseffekte der Hochschulfinanzierung und ihre Konsequenzen," Departmental Discussion Papers 119, University of Goettingen, Department of Economics.
    23. Roberts, Mark & Deichmann, Uwe & Fingleton, Bernard & Shi, Tuo, 2012. "Evaluating China's road to prosperity: A new economic geography approach," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 580-594.
    24. Lerbs, Oliver, 2010. "Is there a link between home ownership and unemployment levels? Evidence from German regional data," CAWM Discussion Papers 34, University of Münster, Center of Applied Economic Research Münster (CAWM).

    More about this item

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:wiw:wiwrsa:ersa03p44. 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: (Gunther Maier). General contact details of provider: http://www.ersa.org .

    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.