Unemployment Differentials Research Articles

Cross-country unemployment insurance, transfers, and trade-offs in international risk sharing

A prerequisite for an optimum currency area are limited divergent developments. In this paper, we assess analytically whether an international transfer mechanism can enhance consumption risk sharing and efficiency of the international division of production in a monetary union. We also derive quantitative results for a potential European unemployment benefit scheme (EUBS). A EUBS can provide risk sharing by stabilizing relative consumption and unemployment differentials. Following supply and government-spending shocks, however, a EUBS would additionally reduce allocative efficiency. The welfare effects of a EUBS hence depend on the underlying cause for cross-country differentials. A EUBS that is only active after specific shocks would maximize overall welfare. Even without such a selective activation, a EUBS would raise welfare in European Core countries in the quantitative model, leaving welfare in the Periphery almost unchanged. During the euro crisis, the Periphery would have benefited from substantial transfers from the Core.

Industrial, regional, and gender divides in British unemployment between the wars

Abstract Despite a substantial body of literature on the severe unemployment crisis in interwar Britain, our understanding of its distributional impacts remains limited. Using newly digitized government data, this paper analyzes the gender, industrial, and regional composition of unemployment 1923–1936. I find that the unemployment rate was higher for men owing in part to a strongly gender-segmented labor market, that unemployment was widespread across industries and not just a product of the declining staple industries, that unemployment exhibited strong seasonality, and that regional unemployment differentials cannot be primarily attributed to regions’ varying industrial compositions. These results offer a more granular view of this mass unemployment episode.

Age and gender differentials in unemployment and hysteresis

Abstract We use a time-varying panel unobserved components model to estimate unemployment gaps disaggregated by age and gender. Recessions before COVID affected men’s labor market outcomes more than women’s; however, the reverse was true for the COVID recession, with effects amplified for younger workers. We introduce time-variation in both the hysteresis dynamics and the Phillips-curve coefficients on labor market slack. The aggregate Phillips curve flattens over time and hysteresis is countercyclical for all groups. We find heterogeneity in both the Phillips curve and hysteresis coefficients, with wages responding more to workers with an outside option (high school- and retirement-age) and larger effects of hysteresis for younger workers.

The Geography of Unemployment

Abstract Unemployment rates differ widely across local labor markets. I offer new empirical evidence that high local unemployment emerges because of elevated local job-losing rates. Local employers, rather than local workers or location-specific factors, account for most of the spatial gaps in job stability. I propose a theory in which spatial differences in job loss emerge in equilibrium because of systematic differences between employers across local labor markets. The spatial sorting decisions of employers in turn shape heterogeneity across locations. Labor market frictions induce productive employers to overvalue locating close to each other. The optimal policy incentivizes them to relocate toward areas with high job-losing rates, providing a rationale for commonly used place-based policies. I estimate the model using French administrative data. The estimated model accounts for over three-quarters of the cross-sectional dispersion in unemployment rates and for the respective contributions of job-losing and job-finding rates. Inefficient location choices by employers amplify spatial unemployment differentials fivefold. Both real-world and optimal place-based policies can yield sizable local and aggregate welfare gains.

THE EFFECTS OF THE COVID-19 PANDEMIC ON UNEMPLOYMENT IN SLOVAKIA AND HUNGARY

Covid-19 pandemic has affected almost in every aspect peoples‘ personal and professional lives. Employment losses have become an everyday occurrence during the pandemic period. As an outcome of the global coronavirus crisis of 2020, unemployment has risen significantly worldwide. In the article, we try to quantify the effect of coronavirus pandemic on the development of the unemployment and unemployment rate in two EU member states. The aim of the article is to evaluate the impact of Covid-19 crisis on the labor market in the Slovak Republic and Hungary. In order to highlight the impact of the pandemic and make comparisons between the mentioned countries, concretely comparative research method was used. Analyses are based on labor market data during the pandemic (2019-2021). Differences in unemployment by gender were examined based on annual data. Differences in unemployment by age, economic sectors and territorial units were analyzed on a quarterly basis. The results of the study indicate a noteworthy increase in the unemployment rate in the Slovak Republic and in Hungary during the Covid-19 pandemic. As a result of the coronavirus crisis, the spreading of unemployment in territorial terms has been more unbalanced for both the Slovak Republic and Hungary. Furthermore, we found that the highest unemployment rate during the considered time period was reached in the industrial sector. The pandemic has significantly impacted the unemployment of the economically active people with a lower level of education. In Slovakia have been introduced stricter anti-pandemic measures, due to which more business enterprises have closed. Also, it has led to more intensive growth of unemployment rate.

Exploring unemployment differentials between former and non-former homeland areas in South Africa: A decomposition approach

ABSTRACT This study decomposes the unemployment rate gap between former and non-former homeland areas in South Africa. We apply the Oaxaca–Blinder [1973] decomposition technique to the 2011 population census community profiles at the main place level. Results indicate that former homeland areas suffer from relatively higher rates of unemployment compared to non-former homeland areas. The 24%-point difference is primarily explained by differences in former homeland area main place endowments. Interventions that improve educational attainment in former homeland areas and those that are sensitive to the labour market challenges faced by black South African youth and women are essential to alleviate the spatial gap.

Cross-Country Unemployment Insurance, Transfers, and Trade-Offs in International Risk Sharing

We assess to which degree an international transfer mechanism can enhance consumption risk sharing as well as allocative efficiency and apply our results to the implicit transfers generated by a potential European unemployment benefit scheme (EUBS). Specifically, we first develop a simple model with nominal rigidities to build intuition by deriving analytical results. We then use a rich DSGE model, calibrated to the Core and the Periphery of the euro area, to quantitatively analyze the changing dynamics that a EUBS brings about. We find that a EUBS can provide risk sharing by stabilizing relative consumption as well as unemployment differentials. Following supply shocks, however, the cross-country transfer embodied in the unemployment benefits is spent to a large degree on relatively inefficiently produced goods in the receiving countries. This renders the allocation even more inefficient by opening country-specific labor wedges further, also after government-spending shocks. Yet, since this trade-off between allocative efficiency and consumption risk sharing does not exist after certain demand shocks, the welfare effects of a EUBS depend on the cause for international unemployment differentials. A EUBS that is only active after specific shocks would therefore maximize overall welfare. Even without this feature, a EUBS would raise Core’s welfare in the quantitative model, leaving Periphery’s welfare almost unchanged.

The development of spatial differentiation of unemployment in Czechia through evolutionary and institutional approaches: the example of the Karvinsko and Jablunkovsko regions

The aim of this paper is to gain insight into the dynamics of spatial differentiation of unemployment on the municipal and microregional levels in Czechia. The spatial patterns of unemployment are quantitatively evaluated; and, based on these results, two microregions are chosen as case studies (Karvinsko and Jablunkovsko). These microregions are spatially close but underwent a totally different evolution in regional unemployment. Factors that affect different dynamics of unemployment are identified based on the analysis of their historical development and interviews with local agents. Thus, potential causes of dissimilar trajectories are revealed. The theoretical framework of the research is based on a combination of evolutionary and institutional approaches in economic geography that emphasize the role of history, continuity, local specifics and informal norms and practices in local and regional development.

The problems and perspectives of the labour market development in Serbia on national and regional level

The paper deals with the analysis of inter-regional differences in unemployment rates, including an assessment of changes in local labour markets in the 2010s. Comparison of statistics related to the labour market development exclusively at the national level does not allow a complete overview of the employment problems. Based on the available data of the Statistical Office of the Republic of Serbia, we have compiled three maps that give a visual representation of the unemployment in municipalities in Serbia. The first map demonstates the share of the unemployed in the total population of municipalities at the beginning of 2018 (taking into account the qualification structure of the unemployed population). The second map reveals the dynamics of unemployment rates in municipalities (value ratio for 2018 and 2010). Finally, the third map reflects the authors' vision of regionalization of the unemployment phenomenon in Serbia, expressed in identifying spatial configurations that differ in labour market characteristics. The regionalization of the phenomenon of unemployment in Serbia has enabled the identification of the most and least successful territories in terms of maintaining stability in the labour market. In addition, we highlighted the existing problems of the labour market, emphasized the importance of implementation of employment policies and inclusion in this process of all societal structures, starting with the state, local authorities, private and public sectors in order to achieve sustainable economic growth.

The Geography of Unemployment

Unemployment rates differ widely across local labor markets. I offer new empirical evidence that high local unemployment emerges because of elevated local job losing rates. Local employers, rather than local workers, account for most of spatial gaps in job stability. I then propose a theory in which spatial differences in job loss arise endogenously, due to the spatial sorting of heterogeneous employers across local labor markets. Labor market frictions induce productive employers to over-value locating close to each other. The optimal policy incentivizes them to relocate to areas with high job losing rates, providing a rationale for commonly used place-based policies. I estimate the model using French administrative data. The estimated model accounts for over three fourths of the cross-sectional dispersion in unemployment rates, as well as for the respective contributions of job losing and job finding rates. Employers' inefficient location choices amplify spatial unemployment differentials five-fold. Both real-world and optimal place-based policies can yield sizable local and aggregate welfare gains.

Gravity models of interprovincial migration flows in Canada with hierarchical multifactor structure

Following recent contributions on migration flows, we contribute to the literature by relaxing restrictions on how multilateral resistance to migration (MRM) may affect province-pair-specific migration flows. We follow recent advancements in the three-dimensional (3D) panel data models with a hierarchical multifactor structure and develop the more flexible specification for MRM. In addition to including unobserved global (country) factors with province-pair-specific coefficients, we can control for local origin (destination)-specific factors that have heterogeneous effects on destinations (origins). We apply the 3DCCE estimator advanced by Kapetanios et al. (J Econom, 2020) to an analysis of the determinants of interprovincial migration flows in Canada from 1976 to 2014. In particular, we find that the recent rise in the internal migration flows, registered in Canada from 2009 onwards, is more likely to be associated with the relative income inequality and network presence rather than the conventional long-run determinants such as income and unemployment differentials.

It's the Way People Move! Labour Migration as an Adjustment Device in Russia

This paper aims to assess the role of migration as an adjustment mechanism device to favor convergence across states and regions of Russia. In contrast to previous studies, we use variations in the population of a region as a proxy of its net migration rate and apply spatial econometric methodology in order to distinguish the effect from the neighbouring regions. We provide descriptive statistical evidence showing that Russia has more/less/the same intense migration flows than the USA and EU. The econometric analysis shows that migration flows are sensitive to both regional income and regional unemployment differentials. Nonetheless, we find that internal migration is sensitive to regional unemployment and income differentials of neighbouring regions. Dependent on the welfare, pre- or after-crisis period, income in neighbouring regions can create out- or in-migration flows. The relatively high degree of internal mobility coupled with the low sensitivity of migration flows to the local unemployment rate of distant regions might explain why migration flows tends not to generate convergence, but rather divergence across Russian regions.

Regional Labor Mobility in Finland

This paper analyzes regional labor mobility in Finland using two complementary empirical approaches: a VAR proposed by Blanchard and Katz (1992) and a gravity model. The results point to a relatively limited regional labor mobility in Finland compared to the U.S. and to EU peers. The limited regional labor mobility is associated with persistent unemployment differentials across regions. Some impediments to regional labor mobility are exogenous, such as large geographical distances across regions and relatively sparse population density, and explain about 23 percent of the variation in labor mobility. Others can be influenced by policy, such as further increase in wage flexibiltiy and reduction of housing costs. These impediments explain about 60 percent of the variation in labor mobility. Greater regional labor mobility could help reduce regional unemployment differentials, improve job matching efficiency, and remove pressures from regional fiscal redistribution.

A longitudinal analysis of ethnic unemployment differentials in the UK

ABSTRACTAs in many developed countries, in the UK the unemployment rate of ethnic minorities is higher than the unemployment rate of the white British majority. These differences may be due to a higher probability of ethnic minorities entering unemployment by losing a job, or to a lower probability of exiting unemployment by finding a job. Using Understanding Society, the UK Household Longitudinal Study, this paper analyses what individual and job characteristics contribute to job loss, what contribute to job finding, and to what extent ethnic unemployment differentials can be explained by such characteristics.For both men and women the results show no relevant ethnic differences in the probability to transition from a paid job into unemployment. Only Indian UK born women seem more likely to transition than white British majority women, while for other groups the small differences are in favour of ethnic minorities. Segregation in occupations characterised by low wages and less stable jobs does not seem to contribute to the higher unemployment rate of ethnic minorities. The main determinant of ethnic unemployment differentials seems to be the longer duration of unemployment for ethnic minorities, which, however, remains largely unexplained after the inclusion of individual and household characteristics.

Spatial differentiation of GDP and unemployment in Poland and Italy with its determinants

The paper aims to identify the scale of spatial differentiation of GDP per capita and unemployment rate in Poland and Italy, as well as to indicate changes in the differentiation trends. The research was carried out at the level of Polish voivodships and Italian regions, forming the territorial units NUTS 2. The elementary methods of descriptive statistics and spatial econometrics (fixed effects) were applied for the research purpose. Data for the years 2002—2014, published by the CSO, Italian National Institute of Statistics (Istat) and Eurostat, were used for the analysis. The results of the research show that Poland and Italy are characterized by a similar, high level of regional diversity of GDP per capita. On the other hand, differences in the level of unemployment among Italian regions are much higher than among Polish voivodships. It was also stated that the differences in examined macroeconomic measures within the two countries are increasing, which in turn can lead to growing inter-regional disparities in the level of development.

What drives unemployment disparities in European regions? A dynamic spatial panel approach

ABSTRACTWhat drives unemployment disparities in European regions? A dynamic spatial panel approach. Regional Studies. This study analyzes unemployment differentials in European regions during the period 2000–11. To that end, a theoretical model with substantive spatial interactions among regions is developed. The solution implies a dynamic-spatial Durbin model specification including regional and institutional-level factors as explanatory variables. In conjunction with dynamic-spatial panel estimates, relative importance metrics are used to quantify the effect of regional disequilibrium, equilibrium and national-level factors. Relative importance analysis suggests that during the pre-crisis period, unemployment disparities were mainly driven by regional-level equilibrium factors. Nevertheless, labour market institutions are of major importance to explain increasing disparities during 2009–11.

Did the Great Recession Downsize Immigrants and Native-Born Americans Differently? Unemployment Differentials by Nativity, Race and Gender from 2007 to 2013 in the U.S.

We use data from the Current Population Survey from 2007 and 2013 to investigate demographic differentials in unemployment during the Great Recession in the U.S. Although our analysis is primarily exploratory and descriptive, our major research objective is to illuminate the unemployment differential between the foreign born and the native born. The findings indicate that during the height of the Great Recession, the foreign born had higher unemployment rates than the native born. However, this differential is statistically explained by their observed characteristics, such as race/ethnicity, gender, age and education. With the net of those variables and a few other demographic covariates, foreign born workers as an overall group actually had somewhat lower chances of being unemployed than native born workers. This finding is discussed in terms of the selectivity of immigrant workers and the possibility that they are somewhat more immediately dependent on having a job. After breaking down the foreign born into major racial/ethnic groups, the results suggest that foreign-born blacks and foreign-born Hispanics are particularly selective with the net of their observed characteristics. The possible sources of such differentials by race/ethnicity and by gender are discussed.

Empirical study of spatial differentiation of youth unemployment in Russia

The purpose of the study is to conduct a statistical analysis and to perform a quantitative assessment of the degree and the dynamics of the interregional differences in youth unemployment in Russia between 2005 and 2013. We decompose the interregional differentiation into “within-group” and “between-group” differences. We also analyse the dynamics of the within-group and between-group differences and estimate their contribution to changes in the interregional differentiation of youth unemployment. Additionally, we estimate the degree and the dynamics of the interregional differences of the youth labour market in Russia in times of crisis and recovery growth. The results show a reduction in the interregional differences in unemployment rates between 2005 and 2008, while in 2009–2013, the interregional differentiation of the labour market increased. We found that the socio-economic effects of youth unemployment, as well as the behavioural response to economic shocks in the age groups of 15–19 and 20–29 years were significantly different.

Influence of the spatial factor on the regional differentiation of unemployment in the Russian economy

This article provides an assessment of the influence of urbanization and agglomeration factors on the level and interregional differentiation of unemployment using spatial autoregressive models. The spatial localization of unemployment has been measured and the excessive differentiation of regions and economic areas has been revealed. Modeling of spatial effects of unemployment in regions of Russia has made it possible to conclude that urbanization and regional localization significantly influence unemployment.

Book review: Francesco Pastore, The Youth Experience Gap. Explaining National Differences in the School-to-work Transition

Francesco Pastore is qualified as full professor of Economic Policy. Currently, he is Assistant Professor of Economics at Seconda Universita di Napoli. He is also secretary of the Italian Association of Labor Economics (AIEL) and a member of the executive board of the Italian Association of Comparative Economic Studies (AISSEC). His main research interests are in labor and education economics. He is also interested in development and transition economics. He has contributed extensively in several such fields as regional unemployment differentials, school-to-work transitions, labor market dynamics, gender discrimination, human capital investment, public employment services and passive as well as active labor market policy, labor market consequences of international trade and nonprofit organization.