Regional labor market adjustment to structural shocks: An international comparison

Abstract

Previous research indicates that local industry composition significantly influences unemployment in the American Rust Belt. This paper uses a dual market model to compare evolutions of structural joblessness in German regions with those of a Rust Belt area in the United States. Results indicate that German labor markets exhibit both intriguing similarities and differences to the US benchmark case. In particular, the contrasts between the two areas highlight the less distinct labor supply flexibility of Western European labor markets as demonstrated by unemployment responses to changes in regional employment prospects.