A regional panel data analysis of the Spanish Beveridge curve

Unemployment is one of the most important problems of the Spanish and European economies. A possible analysis, vastly extended in recent literature, focuses on mismatch problems between labour demand and supply. In this sense, the empirical relationship between the vacancy rate and the unemployment rate, the so-called Beveridge curve, offers a potential instrument to characterise the unemployment of the considered economy. Different studies, such as Jackman et al. (1983), Pissarides (1985) and Abraham (1987) among others, point out that outward shifts of the Beveridge curve can be interpreted as increases in structural unemployment. The identification of these shifts provide useful information that can be used for policy planning. The main objective of this paper is to identify and to quantify the magnitude of outward shifts of the Beveridge curve for the Spanish economy in the period 1978-1996 using annual data from the Encuesta de Poblacion Activa, INE and the Estadistica de Empleo, INEM. As both sources provide regional disaggregated data, the econometric technique to be used will be Dynamic Panel Data (Arellano and Bond, 1988). This kind of analysis will permit to test the significance of time effects and the existence of different regional behaviours in the process of matching jobs with workers.