A regional unemployment model simultaneously accounting for serial dynamics, spatial dependence and common factors
Halleck Vega, Sol Maria ; Elhorst, J.P. - \ 2016
Regional Science and Urban Economics 60 (2016). - ISSN 0166-0462 - p. 85 - 95.
regional unemployment - cross-sectional dependence - dynamic spatial panel models - The Netherlands
Regional unemployment rates tend to be strongly correlated over time, parallel the national unemployment rate, and be correlated across space. We address these key stylized facts by linking different strands of literature into a unified methodology to investigate regional unemployment disparities. This methodology simultaneously accounts for serial dynamics, spatial dependence and common factors, also known as weak and strong cross-sectional dependence. We apply this approach using provincial level data for the Netherlands. The substantial and persistent division between high and low unemployment clusters makes it an interesting case, and data availability since the early 1970s enables a comparison between prior periods of down turn and recovery to the resent economic crisis. It is found that approaches that do not simultaneously account for serial dynamics, spatial dependence and common factors, or that ignore one of these issues, may lead to biased interference.
Modelling regional labour market dynamics in space and time
Halleck Vega, Sol Maria ; Elhorst, J.P. - \ 2014
Papers in Regional Science 93 (2014)4. - ISSN 1056-8190 - p. 819 - 841.
regional labour markets - dynamic spatial panel models - spillover effects
This paper extends the seminal Blanchard and Katz regional market model include interaction effects using a dynamic spatial panel data approach. Three key contributions of this extended model are: (i) the unrealistic assumption that regions are independent of on another no longer has to be made, (ii) the magnitude and significance of so-called spillover effects can be empirically assessed, and (iii) both the temporal and spatial propagation of labo demand shocks can be investigated. Using annual data from 1986-2010 for 112 regions acro eight EU countries, both the non-spatial and spatial models are estimated. It is found that the majority of the spillover effects are highly significant. Consistent with economic theory, the impact of a region-specific demand shock is largest in the region where the shock instigate. The shock also propagates to other regions, especially impacting the first and second-ord neighbours.