Advertisement

Applied Spatial Analysis and Policy

, Volume 12, Issue 3, pp 647–696 | Cite as

An Empirical Analysis of Natural and Cyclical Unemployment at the Provincial Level in Spain

  • Jaime Cuéllar-Martín
  • Ángel L. Martín-RománEmail author
  • Alfonso Moral
Article
  • 124 Downloads

Abstract

Differences in regional unemployment rates, as well as their formation mechanism and persistence, have given rise to many papers in recent decades. The present work contributes to this strand of literature from two different perspectives. In the first part of our work, we follow the methodological proposal put forward by Hofler and Murphy (1989) and Aysun et al. (2014). We use a stochastic cost frontier to break down actual Spanish provincial unemployment (NUTS-3) into two different estimation components: the first associated with aggregate supply side factors, and the other more related to aggregate demand side factors. The second part of our research analyses the existence of spatial dependence patterns among Spanish provinces in actual unemployment and in the two above-mentioned components. The decomposition carried out in the first part of our research tells us what margin policymakers have when dealing with unemployment reductions by means of aggregate supply and aggregate demand policies. Finally, spatial analysis of unemployment rates in Spanish provinces may also have significant implications from the standpoint of economic policy since we find common formation patterns or clusters of unemployment.

Keywords

Unemployment Local labour markets Spatial dependence 

JEL Classification

E24 J64 R11 

Notes

Acknowledgements

The authors are grateful to Roberto Bande, Hector Sala, and Enrique López-Bazo as well as to participants at the XLII Reunión de Estudios Regionales, the XII Jornadas de Economía Laboral, and the 57th ERSA Congress for their comments to an earlier draft. The first and second authors were partially supported by the Spanish Ministry of Economy, Industry and Competitiveness under project ECO2017-82227-P. The third author has been partially supported by Ministry of Economy, Industry and Competitiveness under project CSO2015-69439-R.

References

  1. Aigner, D., Lovell, C. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6(1), 21–37.Google Scholar
  2. Akçagün, P. (2017). Provincial growth in Turkey: A spatial econometric analysis. Applied Spatial Analysis and Policy, 10(2), 271–299.Google Scholar
  3. Anselin, L. (1995). Local indicators of spatial association—LISA. Geographical Analysis, 27(2), 93–115.Google Scholar
  4. Aysun, U., Bouvet, F., & Hofler, R. (2014). An alternative measure of structural unemployment. Economic Modelling, 38, 592–603.Google Scholar
  5. Azmat, G., Güell, M., & Manning, A. (2006). Gender gaps in unemployment rates in OECD countries. Journal of Labor Economics, 24(1), 1–37.Google Scholar
  6. Azorín, J. D. B. (2013). La distribución del desempleo en las provincias españolas: Un análisis con datos de panel mediante el filtrado espacial. Investigaciones Regionales: Journal of Regional Research, 27, 143–154.Google Scholar
  7. Bande, R., & Karanassou, M. (2013). The natural rate of unemployment hypothesis and the evolution of regional disparities in Spanish unemployment. Urban Studies, 50(10), 2044–2062.Google Scholar
  8. Bande, R., & Karanassou, M. (2014). Spanish regional unemployment revisited: The role of capital accumulation. Regional Studies, 48(11), 1863–1883.Google Scholar
  9. Bande, R., Fernández, M., & Montuenga, V. (2008). Regional unemployment in Spain: Disparities, business cycle and wage setting. Labour Economics, 15(5), 885–914.Google Scholar
  10. Bande, R., Fernández, M., Montuenga, V., & Sanromá, E. (2012). Wage flexibility and local labour markets: A test on the homogeneity of the wage curve in Spain. Investigaciones Regionales, 24, 175–198.Google Scholar
  11. Basile, R, Girardi, A., Mantuano, M. (2009). Regional unemployment traps in Italy: Assessing the evidence. Retrieved September 28.Google Scholar
  12. Battese, G. E., & Coelli, T. J. (1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20(2), 325–332.Google Scholar
  13. Baxter, M., & King, R. G. (1999). Measuring business cycles: Approximate band-pass filters for economic time series. The Review of Economics and Statistics, 81(4), 575–593.Google Scholar
  14. Bentolila, S., & Jimeno, J.F. (2003). Spanish unemployment: The end of the wild ride?. FEDEA working paper 2003–10, FEDEA, Fundación de Estudios de Economía Aplicada, Madrid.Google Scholar
  15. Bentolila, S., Dolado, J. J., & Jimeno, J. F. (2012). Reforming an insider-outsider labor market: The Spanish experience. IZA Journal of European Labor Studies, 1(1), 1–29.Google Scholar
  16. Bertola, G., Blau, F. D., & Kahn, L. M. (2007). Labor market institutions and demographic employment patterns. Journal of Population Economics, 20(4), 833–867.Google Scholar
  17. Blanchard, O.J. (2017). Macroeconomics (7th ed.). Pearson Education.Google Scholar
  18. Blanchard, O. J., & Jimeno, J. F. (1995). Structural unemployment: Spain versus Portugal. The American Economic Review, 85(2), 212–218.Google Scholar
  19. Blanchard, O. J., & Katz, L. (1992). Regional evolutions. Brookings Papers on Economic Activity, (1), 1–75.Google Scholar
  20. Blanchard, O. J., Jaumotte, F., & Loungani, P. (2014). Labor market policies and IMF advice in advanced economies during the great recession. IZA Journal of Labor Policy, 3(1), 1–23.Google Scholar
  21. Bodman, P. M. (1999). Labour market inefficiency and frictional unemployment in Australia and its states: A stochastic frontier approach. The Economic Record, 75(2), 138–148.Google Scholar
  22. Booth, A. L., Francesconi, M., & Frank, J. (2002). Temporary jobs: Stepping stones or dead ends? The Economic Journal, 112(480), 189–213.Google Scholar
  23. Bramoullé, Y., & Saint-Paul, G. (2010). Social networks and labor market transitions. Labour Economics, 17(1), 188–195.Google Scholar
  24. Brueckner, J. K. (2003). Strategic interaction among governments: An overview of empirical studies. International Regional Science Review, 26(2), 175–188.Google Scholar
  25. Calvo-Armengol, A., & Jackson, M. O. (2004). The effects of social networks on employment and inequality. The American Economic Review, 94(3), 426–454.Google Scholar
  26. Cazes, S., Verick, S., & Al Hussami, F. (2013). Why did unemployment respond so differently to the global financial crisis across countries? Insights from Okun’s law. IZA Journal of Labor Policy, 2(1), 1–18.Google Scholar
  27. Cingano, F., & Rosolia, A. (2012). People I know: Job search and social networks. Journal of Labor Economics, 30(2), 291–332.Google Scholar
  28. Clark, A. E. (2003). Unemployment as a social norm: Psychological evidence from panel data. Journal of Labor Economics, 21(2), 323–351.Google Scholar
  29. Cliff, A.D., & Ord, J.K. (1981). Spatial processes: Models & applications. Taylor & Francis.Google Scholar
  30. Conley, T. G., & Topa, G. (2002). Socio-economic distance and spatial patterns in unemployment. Journal of Applied Econometrics, 17(4), 303–327.Google Scholar
  31. Costa, H., Veiga, L. G., & Portela, M. (2015). Interactions in local governments spending decisions: Evidence from Portugal. Regional Studies, 49(9), 1441–1456.Google Scholar
  32. Cracolici, M. F., Cuffaro, M., & Nijkamp, P. (2007). Geographical distribution of unemployment: An analysis of provincial differences in Italy. Growth and Change, 38(4), 649–670.Google Scholar
  33. del Barrio-Castro, T., López-Bazo, E., & Serrano-Domingo, G. (2002). New evidence on international R&D spillovers, human capital and productivity in the OECD. Economics Letters, 77(1), 41–45.Google Scholar
  34. Dietz, R. D. (2002). The estimation of neighborhood effects in the social sciences: An interdisciplinary approach. Social Science Research, 31(4), 539–575.Google Scholar
  35. Dolado, J.J., Felgueroso, F., Jimeno, J.F. (1999). The causes of youth labour market problems in Spain: Crowding-out, institutions, or the technology shifts?. Universidad Carlos III de Madrid, Departamento de Economía.Google Scholar
  36. Dolado, J. J., Felgueroso, F., & Jimeno, J. F. (2000). Youth labour markets in Spain: Education, training, and crowding-out. European Economic Review, 44(4), 943–956.Google Scholar
  37. Dolado, J. J., García-Serrano, C., & Jimeno, J. F. (2002). Drawing lessons from the boom of temporary jobs in Spain. The Economic Journal, 112(480), 270–295.Google Scholar
  38. Eichhorst, W., & Neder, F. (2014). Youth unemployment in Mediterranean countries. No. 80, IZA Policy Paper.Google Scholar
  39. Elhorst, J. P. (2003). The mystery of regional unemployment differentials: Theoretical and empirical explanations. Journal of Economic Surveys, 17(5), 709–748.Google Scholar
  40. Elhorst, J. P. (2014). Spatial panel data models. In J. P. Elhorst (Ed.), Spatial econometrics (pp. 37–93). Berlin Heidelberg: Springer.Google Scholar
  41. Fabiani, S., & Mestre, R. (2000). Alternative measures of the NAIRU in the euro area: Estimates and assessment. No. 17, ECB Working Paper.Google Scholar
  42. Filiztekin, A. (2009). Regional unemployment in Turkey. Papers in Regional Science, 88(4), 863–878.Google Scholar
  43. Galiani, S., Lamarche, C., Porto, A., & Sosa-Escudero, W. (2005). Persistence and regional disparities in unemployment (Argentina 1980–1997). Regional Science and Urban Economics, 35(4), 375–394.Google Scholar
  44. García-Mainar, I., & Montuenga, V. (2003). The Spanish wage curve: 1994–1996. Regional Studies, 37(9), 929–945.Google Scholar
  45. Grant, A. P. (2002). Time-varying estimates of the natural rate of unemployment: A revisitation of Okun’s law. The Quarterly Review of Economics and Finance, 42(1), 95–113.Google Scholar
  46. Greene, W. H. (1990). A gamma-distributed stochastic frontier model. Journal of Econometrics, 46(1–2), 141–163.Google Scholar
  47. Greene, W.H. (2008). The econometric approach to efficiency analysis. In: H.O. Fried, C.K. Lovell, S.S. Schmidt (Eds.), The measurement of productive efficiency and productivity growth (pp. 92–250). Oxford Scholarship Online.Google Scholar
  48. Halleck-Vega, S. H., & Elhorst, J. P. (2016). A regional unemployment model simultaneously accounting for serial dynamics, spatial dependence and common factors. Regional Science and Urban Economics, 60, 85–95.Google Scholar
  49. Hedström, P., Kolm, A.S., Aberg, Y. (2003). Social interactions and unemployment. Working paper. 2003:15, Institute Labor Market Policy Evaluation, Uppsala.Google Scholar
  50. Hodrick, R. J., & Prescott, E. C. (1997). Postwar US business cycles: An empirical investigation. Journal of Money, Credit, and Banking, 29(1), 1–16.Google Scholar
  51. Hofler, R. A., & Murphy, K. J. (1989). Using a composed error model to estimate the frictional and excess-supply components of unemployment. Journal of Regional Science, 29(2), 213–228.Google Scholar
  52. Huertas, I. P. M., Hernández, F. N., & Ibáñez, C. U. (2006). Persistencia del desempleo regional: El caso del sur de España. Revista de Economía Laboral, 3(1), 46–57.Google Scholar
  53. Ioannides, Y. M., & Datcher Loury, L. (2004). Job information networks, neighborhood effects, and inequality. Journal of Economic Literature, 42(4), 1056–1093.Google Scholar
  54. Jackman, R., & Roper, S. (1987). Structural unemployment. Oxford Bulletin of Economics and Statistics, 49(1), 9–36.Google Scholar
  55. Jimeno, J. F., & Bentolila, S. (1998). Regional unemployment persistence (Spain, 1976–1994). Labour Economics, 5(1), 25–51.Google Scholar
  56. Jimeno, J. F., & Santos, T. (2014). The crisis of the Spanish economy. SERIEs, 5(2–3), 125–141.Google Scholar
  57. Johnson, J. A., & Kneebone, R. D. (1991). Deriving natural rates of unemployment for sub-national regions: The case of Canadian provinces. Applied Economics, 23(8), 1305–1314.Google Scholar
  58. Jondrow, J., Lovell, C. K., Materov, I. S., & Schmidt, P. (1982). On the estimation of technical inefficiency in the stochastic frontier production function model. Journal of Econometrics, 19(2–3), 233–238.Google Scholar
  59. Kahn, L. M. (2010). Employment protection reforms, employment and the incidence of temporary jobs in Europe: 1996–2001. Labour Economics, 17(1), 1–15.Google Scholar
  60. Kondo, K. (2015). Spatial persistence of Japanese unemployment rates. Japan and the World Economy, 36, 113–122.Google Scholar
  61. Krugman, P., Wells, R., Graddy, M. (2011). Essentials of economics. Worth Publishers.Google Scholar
  62. Kumbhakar, S.C., & Lovell, C.K. (2003). Stochastic frontier analysis. Cambridge university press.Google Scholar
  63. Lázaro, N., Moltó, M., & Sánchez, R. (2000). Unemployment determinants for women in Spain. Labour, 14(1), 53–77.Google Scholar
  64. Lippman, S. A., & McCall, J. J. (1976a). The economics of job search: A survey: Part I. Economic Inquiry, 14(2), 155–189.Google Scholar
  65. Lippman, S. A., & McCall, J. J. (1976b). The economics of job search: A survey: Part II. Economic Inquiry, 14(2), 347–368.Google Scholar
  66. López, F. A., Martínez-Ortiz, P. J., & Cegarra-Navarro, J. G. (2017). Spatial spillovers in public expenditure on a municipal level in Spain. The Annals of Regional Science, 58(1), 39–65.Google Scholar
  67. López-Bazo, E., & Motellón, E. (2012). Human capital and regional wage gaps. Regional Studies, 46(10), 1347–1365.Google Scholar
  68. López-Bazo, E., & Motellón, E. (2013). The regional distribution of unemployment: What do micro-data tell us? Papers in Regional Science, 92(2), 383–405.Google Scholar
  69. López-Bazo, E., Barrio, T. D., & Artis, M. (2002). The regional distribution of Spanish unemployment: A spatial analysis. Papers in Regional Science, 81(3), 365–389.Google Scholar
  70. López-Bazo, E., Barrio, T. D., & Artís, M. (2005). Geographical distribution of unemployment in Spain. Regional Studies, 39(3), 305–318.Google Scholar
  71. Maguire, S., Cockx, B., Dolado, J. J., Felgueroso, F., Jansen, M., Styczyńska, I., Kelly, E., McGuinness, S., Eichhorst, W., Hinte, H., & Rinne, U. (2013). Youth unemployment. Intereconomics, 48(4), 196–235.Google Scholar
  72. Marston, S. T. (1985). Two views of the geographic distribution of unemployment. The Quarterly Journal of Economics, 100(1), 57–79.Google Scholar
  73. Martin, R. (1997). Regional unemployment disparities and their dynamics. Regional Studies, 31(3), 237–252.Google Scholar
  74. Maza, A., & Moral-Arce, I. (2006). An analysis of wage flexibility: Evidence from the Spanish regions. The Annals of Regional Science, 40(3), 621–637.Google Scholar
  75. Maza, A., & Villaverde, J. (2009). Provincial wages in Spain: Convergence and flexibility. Urban Studies, 46(9), 1969–1993.Google Scholar
  76. McCall, J. J. (1970). Economics of information and job search. Quarterly Journal of Economics, 84(1), 113–126.Google Scholar
  77. Meeusen, W., & van Den Broeck, J. (1977). Efficiency estimation from cobb-Douglas production functions with composed error. International Economic Review, 18(2), 435–444.Google Scholar
  78. Moran, P. A. (1948). The interpretation of statistical maps. Journal of the Royal Statistical Society: Series B: Methodological, 10(2), 243–251.Google Scholar
  79. Moran, P. A. (1950). Notes on continuous stochastic phenomena. Biometrika, 37(1–2), 17–23.Google Scholar
  80. Moreno, R., & Vayá, E. (2002). Econometría espacial. Nuevas técnicas para el análisis regional. Una aplicación a las regiones europeas. Investigaciones Regionales, 1, 83–106.Google Scholar
  81. Moreno, R., Paci, R., & Usai, S. (2005). Spatial spillovers and innovation activity in European regions. Environment and Planning A, 37(10), 1793–1812.Google Scholar
  82. Mortensen, D. T. (1970). Job search, the duration of unemployment and the Phillips curve. The American Economic Review, 60(5), 847–862.Google Scholar
  83. Mortensen, D. T. (1986). Job search and labor market analysis. Handbook of Labor Economics, 2, 849–919.Google Scholar
  84. Mortensen, D. T., & Pissarides, C. A. (1999). New developments in models of search in the labor market. Handbook of Labor Economics, 3, 2567–2627.Google Scholar
  85. Murphy, K. J., & Payne, J. E. (2003). Explaining change in the natural rate of unemployment: A regional approach. The Quarterly Review of Economics and Finance, 43(2), 345–368.Google Scholar
  86. Nickell, S., & Bell, B. (1996). Changes in the distribution of wages and unemployment in OECD countries. The American Economic Review, 86(2), 302–308.Google Scholar
  87. Oesch, D. (2010). What explains high unemployment among low-skilled workers? Evidence from 21 OECD countries. European Journal of Industrial Relations, 16(1), 39–55.Google Scholar
  88. Overman, H. G., & Puga, D. (2002). Unemployment clusters across Europe's regions and countries. Economic Policy, 17(34), 115–148.Google Scholar
  89. Patacchini, E., & Zenou, Y. (2007). Spatial dependence in local unemployment rates. Journal of Economic Geography, 7(2), 169–191.Google Scholar
  90. Posada, D. G., Morollón, F. R., & Viñuela, A. (2017). The determinants of local employment growth in Spain. Applied Spatial Analysis and Policy, 1–23.Google Scholar
  91. Rogerson, R. (1997). Theory ahead of language in the economics of unemployment. The Journal of Economic Perspectives, 11(1), 73–92.Google Scholar
  92. Romero-Ávila, D., & Usabiaga, C. (2008). On the persistence of Spanish unemployment rates. Empirical Economics, 35(1), 77–99.Google Scholar
  93. Sala, H., & Trivín, P. (2014). Labour market dynamics in Spanish regions: Evaluating asymmetries in troublesome times. SERIEs, 5(2–3), 197–221.Google Scholar
  94. Simón, H. J., Ramos, R., & Sanroma, E. (2006). Collective bargaining and regional wage differences in Spain: An empirical analysis. Applied Economics, 38(15), 1749–1760.Google Scholar
  95. Solé-Ollé, A. S. (2003). Electoral accountability and tax mimicking: The effects of electoral margins, coalition government, and ideology. European Journal of Political Economy, 19(4), 685–713.Google Scholar
  96. Stevenson, R. E. (1980). Likelihood functions for generalized stochastic frontier estimation. Journal of Econometrics, 13(1), 57–66.Google Scholar
  97. Summers, L. H., Abraham, K. G., & Wachter, M. L. (1986). Why is the unemployment rate so very high near full employment? Brookings Papers on Economic Activity, 1986(2), 339–396.Google Scholar
  98. Tassinopoulos, A., & Werner, H. (1999). To move or not to move: Migration in the European Union (IAB labour market research topics 35). Neurenberg: IAB.Google Scholar
  99. Tatsiramos, K., & van Ours, J. C. (2014). Labor market effects of unemployment insurance design. Journal of Economic Surveys, 28(2), 284–311.Google Scholar
  100. Tobin, J. (1997). Supply constraints on employment and output: NAIRU versus natural rate. Cowles Foundation paper no. 1150.Google Scholar
  101. Topa, G. (2001). Social interactions, local spillovers and unemployment. The Review of Economic Studies, 68(2), 261–295.Google Scholar
  102. Topa, G., & Zenou, Y. (2015). Neighborhood and network effects. Handbook of Regional and Urban Economics, 5, 561–624.Google Scholar
  103. Warren Jr., R. S. (1991). The estimation of frictional unemployment: A stochastic frontier approach. The Review of Economics and Statistics, 73(2), 373–377.Google Scholar

Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Economic AnalysisUniversity of ValladolidValladolidSpain

Personalised recommendations