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Convergence in West German Regional Unemployment Rates

  • Christian Bayer

    (European University Institute, Department of Economics, Florence)

  • Falko Juessen

    (Faculty of Economic & Social Science, University of Dortmund)

Differences in regional unemployment rates are often used to describe regional economic inequality. This paper asks whether changes in regional unemployment differences in West Germany are persistent over time. Only if such changes are persistent, the differences are a sensible measure of inequality and only then can policies be effective that aim at lowering the dispersion of unemployment rates. Our analysis follows a time-series approach to economic convergence and we test whether unemployment differences between regions are stationary or not. While univariate tests show that changes in unemployment differences are persistent, more powerful panel tests find them to be only transitory. However, these tests reveal only a moderate speed of convergence. Since there is a structural break following the second oil crisis, we also employ unit-root tests that allow for such break. Again we find strong evidence for convergence and now also the speed of convergence is found to be very high.

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Paper provided by EconWPA in its series Urban/Regional with number 0411007.

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Length: 20 pages
Date of creation: 30 Nov 2004
Date of revision:
Handle: RePEc:wpa:wuwpur:0411007
Note: Type of Document - pdf; pages: 20
Contact details of provider: Web page: http://econwpa.repec.org

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