Regional unemployment disparities in Germany

Abstract

"Disparities in the regional unemployment rates in Germany are more distinct, the smaller the regional level of observation. Furthermore, the adjustment of smaller spatial units to labour market shocks is found to work predominantly through labour mobility and less through the unemployment and the participation rate. The speed of adjustment in the unemployment rate does instead not vary substantially between Federal States and districts. The distribution of regional unemployment rates thereby displays strong persistence and does not show convergence towards the national unemployment rate, but convergence towards the region-specific means. Labour market adjustment mechanisms work efficient as labour demand shocks disappear within only a few years. The estimates additionally show that substantial migration and commuting activities are responsible for this efficiency. The conclusion from these observations is that persistent disparities are due to differing regional endowments and display a stable distribution of regional unemployment rates. This distribution is relocated by exogenous variables. National exogenous variables as investment figures, the interest rate or public consumption expenditures are mainly responsible for shifts of the distribution and explain the strong cyclical behaviour of regional unemployment rates. The major driving force turns out to be the investment growth rate. The distinction between low, middle and high unemployment regions additionally shows that national variables tend to increase differences between those types of regions, whereas regional variables as the population growth rate or the gdp development do not seem to have an influence. Therefore, a convergence process towards the national unemployment rate does not occur." (Author's abstract, IAB-Doku) ((en))

Cite article

Kunz, M. (2012): Regional unemployment disparities in Germany. An empirical analysis of the determinants and adjustment paths on a small regional level. (IAB-Bibliothek 331), Bielefeld: Bertelsmann, 150 p. DOI:10.3278/300762w