Sources for regional unemployment disparities in Germany : lagged adjustment processes, exogenous shocks or both?

"The paper analyses movements in the unemployment rate of West German districts in the period 1992-2004 by the chain reaction theory of unemployment (CRT). The estimations show that unemployment movements are generated together by lagged adjustment processes and by exogenous shocks. We find that adjustment processes to labour demand shocks are transient and do not display hysteresis effects. The effect of a labour demand shock to the unemployment rate disappears completely within only 2 years. Approximately half of the shock affects the unemployment rate in the contemporaneous period, the other half is due to temporal persistence in future periods, i.e. lagged adjustment effects. These results hold for low, middle and high unemployment regions and are in line with other studies in this field. The effects of exogenous national variables are much higher than those of exogenous regional variables during both, boom as well as recession years. The differentiation between low, middle and high unemployment regions shows that the development of regional factors would generate a regional convergence process, while national factors tend to impede this development." (Author's abstract, IAB-Doku) ((en))Arbeitslosenquote, regionale Disparität - Determinanten, Arbeitslosigkeitsentwicklung, Landkreis, Hysterese, Persistenz, Westdeutschland, Bundesrepublik Deutschland

Disparities, persistence and dynamics of regional unemployment rates in Germany

"The paper shows that the distribution of regional unemployment rates in Germany exhibits strong persistent behaviour. Furthermore, panel unit root tests and autoregressive fixed effects models indicate that regional unemployment rates display conditional rather than unconditional convergence. Thus, highly persistent unemployment disparities can be regarded as region-specific unemployment rates due to different regional endowments, adjusting quite rapidly to their region-specific means and therefore towards a stable pattern of unemployment disparities, rather than towards the national unemployment rate. Additionally, an investigation of adjustment processes suggests that the degree of persistence in western German unemployment rates after aggregate shocks has decreased markedly since the 1960s. For more recent years (1989-2004), neither aggregate nor region-specific shocks exhibit persistent behaviour. Therefore, slowworking adjustment mechanisms in response to shocks are not responsible for the persistent unemployment differentials. A comparison of regions and districts shows that the two regional levels have quite similar adjustment paths. The estimated half-lives of both aggregate and regionspecific shocks are found to be very robust within a range of 1-3 years." (Author's abstract, IAB-Doku) ((en))Arbeitslosigkeitsentwicklung, Arbeitslosenquote, regionale Verteilung, Persistenz, regionale Disparität, Konvergenz

Unemployment dynamics in West Germany : do districts adjust differently than larger regional units?

"The results for labour demand shocks at the place of residence for German Federal States and districts according to the model of regional adjustment developed by Blanchard/Katz (1992) are in line with other studies in this field. They suggest that adjustment to region-specific shocks in the year of the shock is mainly through participation behaviour and unemployment changes, not by migration. If, however, the estimations additionally allow for commuting as adjustment mechanism, the unemployment rate and interregional mobility (i.e. migration and commuting activities) capture the major part of the regional adjustment process. Thus, migration and commuting are highly relevant for the adjustment behaviour of districts as well as for Federal States. As the major part of the shock has settled within only about one to two years, slow working adjustment mechanisms in the aftermath of labour demand shocks are not responsible for persistent unemployment differentials. Furthermore, the hypothesis that the adjustment process for smaller spatial units is much more reflected in interregional mobility and less in changes in the unemployment and the participation rate is confirmed." (Author's abstract, IAB-Doku) ((en))Arbeitskräftenachfrage, Konjunkturabhängigkeit, Arbeitskräfteangebot - Anpassung, regionale Mobilität, Arbeitsmigration, Pendelwanderung, Arbeitslosenquote, regionaler Vergleich, Bundesländer, Landkreis, regionale Disparität, Arbeitskräftemobilität, regionale Faktoren, Westdeutschland, Bundesrepublik Deutschland

Sources for regional unemployment disparities in Germany: lagged adjustment processes, exogenous shocks or both?

"Die Studie untersucht Veränderungen der Arbeitslosenquote in westdeutschen Kreisen im Zeitraum 1992-2004 mit Hilfe der Chain Reaction Theory of unemployment (CRT). Die Schätzungen zeigen, dass sowohl Anpassungsprozesse als auch exogene Schocks für die Veränderungen verantwortlich waren. Anpassungsprozesse nach Arbeitsnachfrageschocks sind vorübergehend und zeigen keine Hysteresiseffekte. Der Effekt eines Arbeitsnachfrageschocks verschwindet innerhalb von nur zwei Jahren. Ungefähr die Hälfte des Schocks schlägt sich dabei bereits in der Periode des Schocks in der Arbeitslosenquote nieder, die andere Hälfte wirkt sich über zeitliche Persistenz, d. h. über verzögerte Anpassungseffekte aus. Diese Ergebnisse gelten sowohl für Regionen mit niedriger, mittlerer und hoher Arbeitslosenquote und sind mit denen aus anderen Studien auf diesem Gebiet vergleichbar. Die Effekte nationaler exogener Variablen sind sowohl in Boom- als auch in Rezessionsjahren deutlich höher als die Effekte regionaler exogener Variablen. Die Unterscheidung in Regionen mit niedriger, mittlerer und hoher Arbeitslosenquote zeigt, dass regionale Faktoren einen regionalen Konvergenzprozess bewirken würden, nationale Faktoren aber dazu tendieren, dieser Entwicklung entgegensteuern." (Autorenreferat)"The paper analyses movements in the unemployment rate of West German districts in the period 1992-2004 by the chain reaction theory of unemployment (CRT). The estimations show that unemployment movements are generated together by lagged adjustment processes and by exogenous shocks. We find that adjustment processes to labour demand shocks are transient and do not display hysteresis effects. The effect of a labour demand shock to the unemployment rate disappears completely within only 2 years. Approximately half of the shock affects the unemployment rate in the contemporaneous period, the other half is due to temporal persistence in future periods, i.e. lagged adjustment effects. These results hold for low, middle and high unemployment regions and are in line with other studies in this field. The effects of exogenous national variables are much higher than those of exogenous regional variables during both, boom as well as recession years. The differentiation between low, middle and high unemployment regions shows that the development of regional factors would generate a regional convergence process, while national factors tend to impede this development." (author's abstract

Unemployment dynamics in West Germany: do districts adjust differently than larger regional units?

"Die Ergebnisse der Anpassung nach Arbeitsnachfrageschocks am Arbeitsort für Bundesländer und Kreise nach dem Modell von Blanchard/Katz (1992) entsprechen den Ergebnissen aus anderen Studien in diesem Bereich. Sie zeigen, dass die Anpassung auf regionsspezifische Schocks im Jahr des Schocks hauptsächlich durch das Partizipationsverhalten und die Arbeitslosenquote, nicht aber durch Migration erfolgt. Wird in den Schätzungen allerdings auch Pendeln als möglicher Anpassungsmechanismus mit berücksichtigt, erfolgt der Großteil der Anpassung über die Arbeitslosenquote und die interregionale Mobilität (also durch Migration und Pendeln). Daher sind Migration und Pendeln höchst relevant für das Anpassungsverhalten von Kreisen und Bundesländern. Da der Großteil des Schocks bereits nach nur ein bis zwei Jahren abgebaut ist, sind langsame Anpassungsprozesse nach Arbeitsnachfrageschocks nicht für persistente Arbeitslosigkeitsdifferenziale verantwortlich. Darüber hinaus kann die Hypothese, dass die Anpassungsprozesse von kleineren regionalen Einheiten sehr viel stärker durch interregionale Mobilität und weniger durch Änderungen in der Arbeitslosenquote geprägt sind, bestätigt werden." (Autorenreferat)"The results for labour demand shocks at the place of residence for German Federal States and districts according to the model of regional adjustment developed by Blanchard/Katz (1992) are in line with other studies in this field. They suggest that adjustment to region-specific shocks in the year of the shock is mainly through participation behaviour and unemployment changes, not by migration. If, however, the estimations additionally allow for commuting as adjustment mechanism, the unemployment rate and interregional mobility (i.e. migration and commuting activities) capture the major part of the regional adjustment process. Thus, migration and commuting are highly relevant for the adjustment behaviour of districts as well as for Federal States. As the major part of the shock has settled within only about one to two years, slow working adjustment mechanisms in the aftermath of labour demand shocks are not responsible for persistent unemployment differentials. Furthermore, the hypothesis that the adjustment process for smaller spatial units is much more reflected in interregional mobility and less in changes in the unemployment and the participation rate is confirmed." (authors abstract

Disparities, persistence and dynamics of regional unemployment rates in Germany

Das Papier zeigt, dass die Verteilung der regionalen Arbeitslosenquoten in Deutschland stark persistentes Verhalten aufweist. Außerdem zeigen panel unit root tests und autoregressive Modelle mit fixen Effekten, dass regionale Arbeitslosenquoten eher bedingter als unbedingter Konvergenz folgen. Daher können äußerst persistente Unterschiede in den regionalen Arbeitslosenquoten als regionsspezifische Arbeitslosenquoten aufgrund von unterschiedlichen Ausstattungsmerkmalen betrachtet werden, die sehr schnell zu ihrem regionsspezifischen Mittelwert zurückkehren und dadurch gegen ein stabiles Muster von Arbeitslosigkeitsdifferenzialen konvergieren nicht aber gegen die nationale Arbeitslosenquote. Darüber hinaus zeigt die Untersuchung der Anpassungsprozesse, dass der Grad der Persistenz der Westdeutschen Arbeitslosenquoten nach Aggregatschocks seit 1960 deutlich gesunken ist. Für die Jahre 1989-2004 zeigen aber weder Aggregatnoch regionsspezifische Schocks persistentes Verhalten. Daher sind langsame Anpassungsprozesse nach dem Auftreten von Schocks nicht für persistente Unterschiede in den regionalen Arbeitslosenquoten verantwortlich.The paper shows that the distribution of regional unemployment rates in Germany exhibits strong persistent behaviour. Furthermore, panel unit root tests and autoregressive fixed effects models indicate that regional unemployment rates display conditional rather than unconditional convergence. Thus, highly persistent unemployment disparities can be regarded as region-specific unemployment rates due to different regional endowments, adjusting quite rapidly to their region-specific means and therefore towards a stable pattern of unemployment disparities, rather than towards the national unemployment rate. Additionally, an investigation of adjustment processes suggests that the degree of persistence in western German unemployment rates after aggregate shocks has decreased markedly since the 1960s. For more recent years (1989-2004), neither aggregate nor region-specific shocks exhibit persistent behaviour. Therefore, slowworking adjustment mechanisms in response to shocks are not responsible for the persistent unemployment differentials. A comparison of regions and districts shows that the two regional levels have quite similar adjustment paths. The estimated half-lives of both aggregate and regionspecific shocks are found to be very robust within a range of 1-3 years

Regional unemployment disparities in Germany: an empirical analysis of the determinants and adjustment paths on a small regional level

Weder empirische Daten noch die ökonomische Theorie geben klare Anhaltspunkte, wie sich regionale Disparitäten entwickeln und welche politischen Maßnahmen angebracht sind, um diese zu reduzieren. Dies gilt insbesondere für Deutschland, wo die Wiedervereinigung zwischen West- und Ostdeutschland im Jahr 1990 die regionalen Arbeitslosigkeitsunterschiede deutlich verstärkt hat. Vor diesem Hintergrund stellt der Autor drei zentrale Fragen: 1. Zeigen Arbeitslosenquoten in den Kreisen und Regionen Deutschlands regionale Konvergenz oder Divergenz? 2. Wie erfolgt die Anpassung von Kreisen und Regionen nach einem regionalen Arbeitsmarktschock? 3. Welche Faktoren sind für die regionalen Arbeitslosigkeitsunterschiede in Westdeutschland verantwortlich? Im Gegensatz zu anderen Studien über regionale Arbeitslosenquoten in Deutschland, die sich ausschließlich auf größere Regionen konzentrieren, zeichnet die Studie ein detaillierteres empirisches Bild, da der Fokus auf der Entwicklung der Kreisebene liegt, wo die Unterschiede besonders ausgeprägt sind.Neither empirical data nor economic theory give a clear indication of how regional disparities develop and which political measures are adequate to reduce them. This holds particularly true for Germany, where the unification between West and East Germany in 1990 amplified regional unemployment disparities tremendously. Against this background, the author addresses three key questions: 1. Do unemployment rates across districts and regions converge or diverge within Germany? 2. How do districts and regions adjust in the aftermath of a regional labour market shock? 3. What are the reasons for the regional unemployment disparities observed in western Germany? As opposed to previous studies about unemployment disparities within Germany which only focused on the larger regional level, the study provides a more precise empirical picture by focusing on development at the small district level where disparities are especially large

Regional employment forecasts with spatial interdependencies

"The labour-market policy-mix in Germany is increasingly being decided on a regional level. This requires additional knowledge about the regional development which (disaggregated) national forecasts cannot provide. Therefore, we separately forecast employment for the 176 German labour- market districts on a monthly basis. We first compare the prediction accuracy of standard time-series methods: autoregressive integrated moving averages (ARIMA), exponentially weighted moving averages (EWMA) and the structural-components approach (SC) in these small spatial units. Second, we augment the SC model by including autoregressive elements (SCAR) in order to incorporate the influence of former periods of the dependent variable on its current value. Due to the importance of spatial interdependencies in small labour-market units, we further augment the basic SC model by lagged values of neighbouring districts in a spatial dynamic panel (SCSAR). The prediction accuracies of the models are compared using the mean absolute percentage forecast error (MAPFE) for the simulated out-of-sample forecast for 2005. Our results show that the SCSAR is superior to the SCAR and basic SC model. ARIMA and EWMA models perform slightly better than SCSAR in many of the German labour-market districts. This reflects that these two moving-average models can better capture the trend reversal beginning in some regions at the end of 2004. All our models have a high forecast quality with an average MAPFE lower than 2.2 percent." (Author's abstract, IAB-Doku) ((en))regionaler Arbeitsmarkt, Beschäftigungsentwicklung, Prognoseverfahren, Arbeitsmarktprognose - Methode

Regional Unemployment Forecasting Using Structural Component Models With Spatial Autocorrelation

Labour-market policies are increasingly being decided on a regional level. This implies that institutions have an increased need for regional forecasts as a guideline for their decision-making process. Therefore, we forecast regional unemployment in the 176 German labour market districts. We use an augmented structural component (SC) model and compare the results from this model with those from basic SC and autoregressive integrated moving average (ARIMA) models. Basic SC models lack two important dimensions: First, they only use level, trend, seasonal and cyclical components, although former periods of the dependent variable generally have a significant influence on the current value. Second, as spatial units become smaller, the influence of “neighbour-effects†becomes more important. In this paper we augment the SC model for structural breaks, autoregressive components and spatial autocorrelation. Using unemployment data from the Federal Employment Services in Germany for the period December 1997 to August 2005, we first estimate basic SC models with components for structural breaks and ARIMA models for each spatial unit separately. In a second stage, autoregressive components are added into the SC model. Third, spatial autocorrelation is introduced into the SC model. We assume that unemployment in adjacent districts is not independent for two reasons: One source of spatial autocorrelation may be that the effect of certain determinants of unemployment is not limited to the particular district but also spills over to neighbouring districts. Second, factors may exist which influence a whole region but are not fully captured by exogenous variables and are reflected in the residuals. We test the quality of the forecasts from the basic models and the augmented SC model by ex-post-estimation for the period September 2004 to August 2005. First results show that the SC model with autoregressive elements and spatial autocorrelation is superior to basic SC and ARIMA models in most of the German labour market districts.

Regional employment forecasts with spatial interdependencies

"The labour-market policy-mix in Germany is increasingly being decided on a regional level. This requires additional knowledge about the regional development which (disaggregated) national forecasts cannot provide. Therefore, we separately forecast employment for the 176 German labour- market districts on a monthly basis. We first compare the prediction accuracy of standard time-series methods: autoregressive integrated moving averages (ARIMA), exponentially weighted moving averages (EWMA) and the structural-components approach (SC) in these small spatial units. Second, we augment the SC model by including autoregressive elements (SCAR) in order to incorporate the influence of former periods of the dependent variable on its current value. Due to the importance of spatial interdependencies in small labour-market units, we further augment the basic SC model by lagged values of neighbouring districts in a spatial dynamic panel (SCSAR). The prediction accuracies of the models are compared using the mean absolute percentage forecast error (MAPFE) for the simulated out-of-sample forecast for 2005. Our results show that the SCSAR is superior to the SCAR and basic SC model. ARIMA and EWMA models perform slightly better than SCSAR in many of the German labour-market districts. This reflects that these two moving-average models can better capture the trend reversal beginning in some regions at the end of 2004. All our models have a high forecast quality with an average MAPFE lower than 2.2 percent." [authors abstract