Regional unemployment and productivity in Europe*

Roberto Basile () and Luca De Benedictis ()

Papers in Regional Science, 2008, vol. 87, issue 2, 173-192

Abstract: Abstract. We analyse the relationship between regional unemployment and labour productivity in Europe, basing our empirical analysis on the predictions of a Neary‐type General Oligopolistic Equilibrium trade model with efficiency‐wages. Using semiparametric and dynamic panel data estimators and controlling for other factors, we give evidence of a nonlinear relationship between productivity and regional unemployment in Europe: with a level of productivity smaller than a certain threshold, this relationship is negative, while no relation occurs in the case of higher productivity regions. This evidence proves an important role of a wage‐floor (induced by efficiency wages and exacerbated by institutional factors) under which the productivity gap cannot be compensated by a wage gap. Resumen. Analizamos la relación entre el desempleo regional y la productividad laboral en Europa, tomando como base de nuestro análisis empírico las predicciones de un modelo de comercio general oligopolístico de equilibrio tipo Neary con salarios eficientes. Mediante el uso de estimadores semiparamétricos y datos de panel dinámicos y control de otros factores, proporcionamos evidencia de una relación no lineal entre la productividad y el desempleo regional en Europa: con un nivel de productividad por debajo de un cierto valor umbral, esta relación es negativa, mientras que no existe esta relación en el caso de regiones con productividad mas elevada. Esta evidencia prueba el papel importante de una base salarial (inducida por salarios eficientes y exacerbada por factores institucionales) por debajo de la cual la diferencia de productividad no puede ser compensada por una diferencia salarial.

Date: 2008
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Citations: View citations in EconPapers (22)

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https://doi.org/10.1111/j.1435-5957.2007.00152.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:presci:v:87:y:2008:i:2:p:173-192

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