Nonlinear Stochastic Convergence Analysis of Regional Unemployment Rates in Poland

Abstract

This paper analyzes convergence of unemployment rates in Poland at the local level by testing nonlinear convergence, applying the modified KSS-CHLL test for each pair of territorial units. The results suggest that actually the convergence is a rare phenomenon and occurs only in 3 227 cases out of potential over 70 000 combinations. This paper inquires which systematic reasons contribute to this phenomenon. There are some circumstances under which unemployment convergence should be more awaited than in the others. These include sharing a higher level territorial authority, expe- riencing similar labour market hardship or sharing the same structural characteristics. For each of these three criteria we analyse the frequency of the differential non-stationarity within groups as evidence of convergence or Òcatching upÓ.nonlinear stochastic convergence, regional unemployment, Poland