Article thumbnail

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

By Roberto Bande and Marika Karanassou


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.

OAI identifier:

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

Suggested articles


  1. (1999). A comparative Study of Unit Root Tests with Panel Data and a New Simple Test”,
  2. (1987). A simple positive, semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix”,
  3. (1986). Analysis of Panel Data, Cambridge:
  4. and Puga D.(2002):"Unemployment Clusters Across Europe’s Regions and Countries".
  5. and R.Reis (2004):"The Persistence of Inflation in the United States". Mimeo,
  6. (1995). Econometric Analysis of Panel Data,
  7. (2000). Estimation and inference with non-stationary panel time-series data”,
  8. (1992). Evolutions",
  9. (1996). Explaining Disparities in Unemployment Dynamics”
  10. (1978). Fixed Costs, Employment and labour Demand over the Cycle",
  11. (2003). Impacto de los Fondos Estructurales: convergencia real y cohesión interna". FEDEA, Estudios Sobre la Economía Española,
  12. (1991). Inequalities, migration and mismatch in Italy, 1960-86",
  13. (1999). Inference for Unit Roots in Dynamic Panels where the Time Dimension is Fixed”,
  14. (1999). La dinámica territorial de la población española: un panorama y algunos resultados provisionales".
  15. (1999). Linear Regression Limit Theory for Nonstationary Panel Data”,
  16. (1997). migration in Spain: the effect of personal characteristics and of unemployment, wage and house price differentials using pooled cross-sections".
  17. Montuenga-Gómez (2006):"Regional Disparities in the Unemployment Rate: The Role of the Wage Setting Mechanism".
  18. Murgui (2002):"La base de datos BDMORES".
  19. (1998). New About The “New Economic Geography"". Oxford Review of Economic Policy.
  20. (2000). Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey”,
  21. (1995). On bias, inconsistency, and efficiency of various estimators in dynamic panel data models”,
  22. (1999). Panel Data Unit Roots and Cointegration: An Overview”,
  23. (1995). Regional labour market dynamics in Europe".
  24. (1998). regional unemployment disparities: convergence or persistence?".
  25. (1994). Slumps. The Modern Equilibrium Theory of Unemployment, Interest and Assets".
  26. Snower (1998):"How Labour Market Flexibility Affects Unemployment: Long.Term Implications of the Chain Reaction Theory".
  27. (2003). Snower (2000):"Adjusment Dynamics and the Natural Rate".
  28. Snower (2000):"Characteristics of Unemployment Dynamics: The Chain Reaction Theory Approach".
  29. Snower (2003):"Unemployment in the European Union: A Dynamic Reappraisal",
  30. Snower (2006):"Phillips Curve Tradeoffs and the Natural Rate of Unemployment: A Critique and a Synthesis," mimeo.
  31. (1932). Statistical Methods for Research Workers, Edinbutgh: Oliver
  32. (1988). Testing for a unit root in time series regression”,
  33. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: how sure are we that economic time series are non stationary?",
  34. (2003). The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations".
  35. (1999). The Rise and Fall of Regional Inequalties",
  36. (1987). Time series regression with a unit root”,
  37. (1998). Unemployment Dynamics: The Chain Reaction Theory of Unemployment,"
  38. (2004). Unemployment Invariance ",
  39. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties”,
  40. (1993). Unit Root Tests in Panel Data: New Results”,
  41. (1985). Views Of The Geographic Distribution Of Unemployment".
  42. (1980). Wage Setting in a Macro Model".
  43. (1989). Why Does Unemployment Persist?"