Employment in Spanish regions: cost-control or growth-enhancing policies?
The sets of relatively high and low unemployment regions have not changed in decades. Since generic labour market reforms have been fruitless on this respect, we explore whether such groups of regions react differently to key drivers of employment and wage setting. We find that while the more developed regions respond to labour share and investment innovations, employment in the more lagging regions is mainly led by capital accumulation. Our results give support to a place-based strategy of regional development, call for more region-specific policies and discard standard labour market reforms as a unique tool to manage the unemployment rate problem.
JEL ClassificationR11 E24 E22 J23 J31
Héctor Sala is grateful to the Spanish Ministry of Economy and Competitiveness for financial support through grant ECO2016-75623-R. Roberto Bande acknowledges financial support from Xunta de Galicia, through grant ED431C 2017/44. Authors acknowledge very useful comments and suggestions from two anonymous referees.
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