Spanish Regional Unemployment Revisited: The Role of Capital Accumulation

This paper provides new evidence for the evolution of regional unemployment rates in Spain over the 1980-2000 period. We argue that interactive dynamic systems of labour demand, wage setting, and labour force equations (i) allow for a richer interpretation of regional disparities, and (ii) can capture the unemployment effects of growing variables such as capital stock. After classifying the 17 Spanish regions into high and low unemployment groups using kernel and cluster techniques, we estimate a structural labour market model for each group and evaluate the unemployment contributions of investment, benefits, taxes, and the oil price. We find that the main driving force of regional unemployment swings is capital accumulation.Regional unemployment, Disparities, Capital accummulation, Kernel, Cluster

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

This paper aims to shed light in the dynamics of Spanish regional unemployment rates and determine the driving forces of their disparities. The Spanish economy has one of the highest unemployment rates in the EU and is characterised by severe regional disparities. We apply the chain reaction theory of unemployment according to which the evolution of unemployment is driven by the interplay of lagged adjustment processes and the spillover effects within the labour market system. Our model includes nationwide as well as region-specific variables, and takes into account the limited labour and firm mobility in Spain. We show that the degree of labour market flexibility differs between high and low unemployment regions, and find that investment has a major influence on the unemployment trajectory. In addition, we find that in bad times high unemployment regions are hit more severely than low unemployment regions, while in good times high unemployment regions do not benefit as much as low unemployment regions.Regional disparities, Unemployment, Spillover effects, Labour market lagged adjustment processes

The NRU and the Evolution of Regional Disparities in Spanish Unemployment

On both theoretical and empirical grounds, this paper provides evidence that refutes the natural rate of unemployment (NRU) hypothesis as an explanation of the evolution of regional disparities in the unemployment rate. We first present our analytical framework, which follows the chain reaction theory (CRT) of unemployment and argues that (i) a system of interactive labour market equations, rather than a single-equation unemployment rate model, is better equipped to accommodate unemployment dynamics, and (ii) due to the interplay of frictions and growth in labour markets, the NRU ceases to be an attractor of the unemployment rate time path. We then provide evidence that the Spanish economy is characterised by large and persistent disparities in the regional unemployment rates. Through standard kernel density tecnhiques, we demonstrate the existence of marked differences between two groups of high and low unemployment regions that remain stable in their composition through time. Finally, we review our empirical labour market model for each group of regions and evaluate the corresponding natural rates. Our findings confirm that the evolution of regional disparities cannot be attributed to disparities in the natural rates, given that these, although different, do not act as an attractor of unemployment. Thus, the NRUs offer little help in the formulation of labour market policies.regional unemployment, disparities, kernel, natural rate, frictional growth

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

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.

Wage flexibility and local labour markets: homogeneity of the wage curve in Spain

In this paper we analyse wage flexibility in Spain and its regional differences, departing from the estimation of wage curves. Specifically, and using as the main data source the Wage Structure Survey, we proceed to estimate for each Spanish region a wage equation, which explains observed wage received by workers to a group of personal and job characteristics, as well as the unemployment rate. This analysis allows to test hypothesis concerning the possible changes that may have occurred in each region in the degree of wage flexibility between the two years considered in the Survey. Also, we test the existence of regional differences in the degree of wage flexibility, which may have an important influence in the evolution of regional unemployment, given its impact on the ability of the local labour market to absorb negative shocks. The paper also allows to analyse the variability of the wage flexibility estimation with respect to the dependent variable, which could explain opposite results in the existing literature

Regional Unemployment in Spain - Disparities, Business Cycle and Wage Setting

The existence and persistence of regional disparities is a common problem of many European economies. However, in Spain this fact exhibits a characteristic feature: a strong positive relationship with the business cycle. The analysis in this paper investigates the relationship between this distinguishing feature of the Spanish economy with the wage bargain system, and how changes in this system may have influenced the aggregate Spanish labour market performance in the recent past. The empirical findings of an important imitation effect in wage bargainings may explain both the persistence of disparities and their positive relationship with the cycle. This result has a direct implication to employment policies, which must take into account the regional dimension of the unemployment problem.

The NRU and the Evolution of Regional Disparities in Spanish Unemployment

On both theoretical and empirical grounds, this paper provides evidence that refutes the natural rate of unemployment (NRU) hypothesis as an explanation of the evolution of regional disparities in the unemployment rate. We first present our analytical framework, which follows the chain reaction theory (CRT) of unemployment and argues that (i) a system of interactive labour market equations, rather than a single-equation unemployment rate model, is better equipped to accommodate unemployment dynamics, and (ii) due to the interplay of frictions and growth in labour markets, the NRU ceases to be an attractor of the unemployment rate time path. We then provide evidence that the Spanish economy is characterised by large and persistent disparities in the regional unemployment rates. Through standard kernel density tecnhiques, we demonstrate the existence of marked differences between two groups of high and low unemployment regions that remain stable in their composition through time. Finally, we review our empirical labour market model for each group of regions and evaluate the corresponding natural rates. Our findings confirm that the evolution of regional disparities cannot be attributed to disparities in the natural rates, given that these, although different, do not act as an attractor of unemployment. Thus, the NRUs offer little help in the formulation of labour market policies.Regional unemployment, Disparities, Kernel, Natural rate, Frictional growth

Regional differences in the Okun’s Relationship: New Evidence for Spain (1980-2015)

Producción CientíficaThis article provides new empirical evidence on the relationship between the unemployment rate and the output growth in Spain at the regional level. The «gap version» with the output growth on the left-hand side of the equation is our benchmark model. Our empirical results show that all coefficients are significant and show the expected negative sign. Significant regional differences in the Okun’s relationship, both for the short run and the long run, are found. These results are robust to two different specifications for the gaps: the HP filter and the QT procedure. In the final part of the article, it is also found that the OLS and the GMM estimates for panel data exhibit a similar pattern and that there is a clear asymmetry in the Okun’s relationship in booming and recession phases of the Spanish business cycle.Spanish Goverment projects ECO2014-52343-P and ECO 2017-82227-