Regional disparities and national similarities in Spanish unemployment: a case of seasonal cointegration?

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Abstract:

Short-run fluctuations in unemployment could be interpreted as transitory movements away from a hypothetical equilibrium. The problem, apart from the existence of such equilibrium, is the existence of an adjustment mechanism that ensures the convergence of the short towards the long run. With quarterly data from the Spanish labour market since 1975, we have estimated a vectorial error correction model that allows for precisely this convergence. The objective was to investigate the variables that explain the two distinctive features of Spanish unemployment, its size and its persistence. We have found that there is a cointegration relationship between unemployment and production proxied by several variables. For this reason, rather than hysteresis, we have found a high persistence in Spanish unemployment. This persistence could be explained by regional mismatch, that is, lack of adjustment between demand and supply of labour in some Spanish regions. We have used regional data to find those common trends, i.e. non-stationary factors, in Spanish regional unemployment that impede the complete integration of the Spanish market. We have found that the Spanish labour market is far from integrated, presenting non-stationarities in the long run as well as at seasonal level. This could be due to extreme lack of labour mobility, leading to an increase of the unemployment persistence.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/000368496327516

Publication date: December 1, 1996

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