Regional disparities in a small country? An analysis of regional unemployment and participation differentials in the Netherlands from 1975 to 2003.

The existence of regional support programs presumes that labour markets in the Netherlands do not clear at the national, but at some local level. From a general equilibrium perspective, it is far from straightforward to identify the regional dimension of labour markets. This study argues that the size and persistence of regional unemployment and participation differentials are an appropriate indicator. We analyse regional unemployment and participation in the Netherlands from 1975 until 2003. Empirically, differences in inactivity do not seem to be a reliable indicator of the regional component of labour markets. Both from an international perspective, and in comparison to variation of labour market conditions over the business cycle, the regional dimension of labour markets appears to be small. However, it is relatively large for women, youths and the lower educated, which are the least mobile groups. It would be efficient to aim regional labour market programs at these groups, if such programs are desirable at all.

Agglomeration Externalities and Urban Growth Controls

Should constraints on urban expansion be relaxed because of external agglomeration economies? In a system of heterogeneous cities, we demonstrate that second-best land use policy consists of a tax on city creation and a subsidy (tax) on urban development in cities in which the marginal-average productivity gap is above (below) average. However, the implementation of this policy requires coordination at the system level. A tax on city creation does not raise welfare if development taxes are set decentrally by competitive urban developers, nor does correction of these taxes raise welfare if a tax on city creation is unavailable. In the resulting constrained optimal allocation, urban development is subsidized in all cities. The quantitative significance of these findings is explored in an application of our model.

Regional disparities in a small country? An assessment of the regional dimension to the Dutch labour market on the basis of regional unemployment and participation differentials

This paper explores regional unemployment and participation data that distinguish gender, age and educational attainment. We observe a panel of 40 Dutch regions over the period 1992 - 2003. Issues such as the national component in regional labour market developments, the role of the labour force composition and persistence of unemployment and participation differentials are considered. A dominance of national unemployment and participation on regional outcomes is found, suggesting a modest regional component to labour market dynamics in the Netherlands. Composition of the potential labour force does not fully account for the remaining differences however. There exists a regional component to unemployment for lower educated, for example. We find that persistence of regional unemployment and participation differentials may be explained to some extent by persistence of regional differences in labour force composition. Persistence of these differentials is strong for lower educated but almost absent for higher educated persons, suggesting that the labour market for the higher educated clears at the national rather than the regional level. Finally, we investigate the effect of unemployment on labour participation. Unlike other recent evidence, our results yield little support for a “discouraged worker effect”. For all population groups, the relationship is statistically insignificant when we control for time-invariant and region-invariant heterogeneity.

A Taste for Trips out of Town: Urban Sprawl and Access to Open Space

Residential development at the urban fringe raises the cost of trips to open space. We derive a simple expression for the tax that internalizes this effect of sprawl in a monocentric city andapply it using survey data on recreational activity. Urban sprawl is inefficient if landowners ignore the social value of open space in their decision to develop it. The absence of a market for open space amenities impedes reliable estimation of their value, so policies that control urban growth may be ill-informed (Brueckner, 2000). Our approach to this valuation problem relies on the well-established notion that travel costs of recreational activity serve as an implicit price (Hotelling, 1947; Phaneuf and Smith, 2006). We extend the conventional monocentric city model with a demand for ‘trips out of town’: recreation in large contiguous undeveloped areas like forests, wetlands or the countryside, for which open space within the urban boundary is an imperfect substitute. Urban expansion reduces accessibility of such ‘true open space’ for prior inhabitants. We derive a simple expression for the tax on conversion of agricultural land to urban use that internalizes this effect and apply it to the city of Amsterdam. The travel cost approach has rarely been applied to the valuation of open space in or near urban areas (McConnell and Walls, 2005). In particular, most applied welfare analyses of open space provision in a general equilibrium framework have been based on capitalization of benefits into local property values. This entails a focus on comparably localized effects.1 Notably, open space amenities in Cheshire and Sheppard (2002) are confined to a surrounding squared kilometre. Walsh (2007) also considers the benefit of proximity to public open space, yet the average distance is only about one kilometre in his empirical application. In large cities, visits to true open space will generally require a much longer trip.

External Benefits of Brownfield Redevelopment: An Applied Urban General Equilibrium Analysis

This paper models external benefits of the transformation of an inner city industrial site into a residential area in an urban general equilibrium framework Does brownfield redevelopment warrant government support? We model external benefits of the transformation of an inner city industrial site into a residential area in an urban general equilibrium framework, focussing on the removal of a local nuisance, the exploitation of agglomeration economies and preservation of open space at the urban fringe. These benefits are compared to the value of transformed land, which accrues to the developer. A numerical application indicates that local nuisance and agglomeration effects may push social returns significantly beyond these private returns. However, depending on the price elasticity of local housing demand, the amount of preserved greenfield land may be small and it only generates additional benefits to the extent that direct land use policies fail to internalize its value as open space.

Interregional migration in The Netherlands: an aggregate analysis

The understanding of migration behaviour is of key importance for regional population forecasting. This paper studies the phenomenon empirically, the results are to be applied in a regional labour market model that forecasts the spatial distribution of employment and labour force in the long term. Therefore, we pay particular attention to the impact of local labour market developments. Population forecasting demands for a macro approach to migration. However, certain relations that appear evident from microanalyses are difficult to trace in aggregate data. There are two ways in which we deal with this problem. We distinguish seven age groups. Since some migration motives (like education) are associated with particular age groups, we get a clearer picture of underlying mechanisms. Secondly, we expect that the share of labour motivated migrations in the flow between two regions increases with the distance between them. We therefore consider the impact of explanatory variables both on short and on longer distances. We split the migration decision into a decision to move and a choice of destination. For each age group, we propose a generation model based on population characteristics, that projects the total number of movers per region. The distribution of these migrants is determined by means of a production constrained spatial interaction model. Explanatory variables cover housing, labour market and study motives. Housing market related variables dominate short distance moves. Our estimation results show that labour market variables indeed play a significant role in describing long distance moves of young adults.

Housing supply in the Netherlands

In spite of a growing recognition of the importance of supply conditions for the level and volatility of house prices, empirical work on housing supply outside the US is scarce. This paper considers various measures of housing supply in the Netherlands, where real house prices have roughly tripled since 1970. Besides the volume of investment in residential structures and new housing construction in units, we derive time series of structure and location quality in a hedonic analysis. Each of these variables appears to be almost fully inelastic with respect to house prices in at least the short to medium long run. Further analysis of the quality of location index shows that conventional models of competitive land and housing markets cannot account for these findings. However, they may be well explained in terms of the rather extensive body of interventions by the Dutch government.

Are workers compensated by cheaper housing in regions where unemployment is high? Theory and evidence from a housing demand survey

The empirical wage curve literature has demonstrated that workers in high-unemployment regions earn less. At the same time, many labour markets, especially in Europe, are characterised by persistent regional unemployment differentials and a low interregional labour mobility rate. It is argued in this paper that workers in high-unemployment regions are compensated in the housing market, which discourages migration to low-unemployment regions. We derive a multiregional efficiency wage model allowing for endogenous land prices, and therefore house prices, as well as endogenous lot sizes. It is shown that in high-unemployment regions, land prices are lower and lot sizes are larger. Therefore, aggregate regional house price data misrepresent the compensating differential. Employing a Dutch housing demand survey, we show that attribute corrected house prices and rents are 10.4 respectively 2.4 percent lower when regional unemployment is one percent higher.

Interaction of Regional Population and Employment over Time: identifying short-run effects and equilibrium adjustment

We investigate the interaction of regional population and employment in a simultaneous model. A focus on regional time series allows us to innovate in two ways on the ongoing causality debate in the literature. Firstly, a dynamic specification is proposed that generalizes the often assumed lagged adjustment process and enables to identify both short and long-term effects. We argue that the long-run relationship between population and employment should be interpreted as a labour market equilibrium. A second improvement on current empirical evidence is the use of region and time-specific fixed effects. Because by applying these panel data techniques, unobserved heterogeneity on the regional level and national trends are controlled for, the identification of regional population-employment interaction is substantially less troubled by an omitted variables problem. The model is estimated on almost three decades of annual data for regions in The Netherlands. This dataset is unique because it includes internal migration, so that we can disentangle net migration and exogenous natural population increase in order to model population adjustment more accurately. Reflecting the geographical structure of the country, which is characterised by overlapping urban areas, we allow for interregional commuting. Our main findings are that in The Netherlands, employment growth responds to deviations from regional labour market equilibria, but net internal migration is only slightly affected by regional employment in the short run. This implies that equilibrium on regional labour markets is restored through adjustment of employment instead of population. It also illustrates the additional insight into dynamic adjustment processes that can be gained from distinguishing both short and long-run effects, the importance of which is confirmed by rejection of the lagged adjustment process hypothesis for our data. Finally, the dominance of supply side factors in the employment equation casts doubt on appropriateness of traditional regional export base and multiplier models, which heavily rely on the assumption that local factor supply constraints are absent.

Commuting and Panel Spatial Interaction Models: Evidence of Variation of the Distance-Effect over Time and Space

We apply spatial interaction models using panel data to explain commuting behaviour in the Netherlands. Our main conclusion is that the distance-decay effect is not constant over time and that changes in this effect are region specific. In more densely populated regions the change in the distance-decay parameter is small suggesting that regional increases in congestion have a large negative effect on the increases in average commuting distance. The panel spatial interaction model we derive is well-suited for testing significance of the centrality index (an often used variable in spatial interaction models). Although evidence is found for competition effects in a pooled cross section framework, controlling for time invariant unobserved heterogeneity renders this relation spurious.