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Labour Market Flexibility and Regional Unemployment Rate Dynamics: Spain (1980-1995)

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  • Roberto Bande

    ()

  • Marika Karanassou

    ()

Abstract

This paper analyses the theoretical and empirical implications of the Chain Reaction Theory of unemployment movements on regional unemploment persistence and regional disparities. This is the first attempt to apply this theory to a regional context. The Chain Reaction Theory focuses on the interaction among labour market adjustment processes and the interplay of such processes and the dynamic structure of labour market shocks. Under this approach we may explain unemployment rate disparities between regions as the result of different responses to idyosincratic and aggregate shocks working their way through different labour market adjustment processes in each region. We test empirically this theory to the Spanish case with a regional dataset covering the 1980-2000 period. Our results show that the Chain Reaction Theory explains well the recent behaviour of Spanish regional disparities in unemployment.

Suggested Citation

  • Roberto Bande & Marika Karanassou, 2006. "Labour Market Flexibility and Regional Unemployment Rate Dynamics: Spain (1980-1995)," ERSA conference papers ersa06p53, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa06p53
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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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