IDEAS home Printed from https://ideas.repec.org/a/bla/labour/v16y2002i2p267-286.html
   My bibliography  Save this article

Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?

Author

Listed:
  • Sari Pekkala
  • Aki Kangasharju

Abstract

This paper analyses regional labour market adjustment in the Finnish provinces during 1971–96. It investigates the interrelations of employment, unemployment and labour force participation to examine how a change in labour demand is adjusted to. The study questions the usual assumption that positive and negative shocks evoke similar adjustment processes. Instead, we test for the possibility that the effects of positive and negative shocks are asymmetric. The analysis reveals that there is little asymmetry in the adjustment to region‐specific labour demand shocks, but adjustment to total (region‐specific plus common component) shocks displays more asymmetry. The region‐specific component of a labour demand shock has short‐lived effects on unemployment and participation, and its effect on employment is very small but permanent [persistent?]. Initially, most of the fall in employment is absorbed by the unemployment and participation rate, but after a few years migration plays a larger role in the adjustment process.

Suggested Citation

  • Sari Pekkala & Aki Kangasharju, 2002. "Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?," LABOUR, CEIS, vol. 16(2), pages 267-286, June.
    • Handle: RePEc:bla:labour:v:16:y:2002:i:2:p:267-286
    DOI: 10.1111/1467-9914.00196
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-9914.00196
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-9914.00196?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    2. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    3. Robert J. Barro & Mark Rush, 1980. "Unanticipated Money and Economic Activity," NBER Chapters, in: Rational Expectations and Economic Policy, pages 23-73, National Bureau of Economic Research, Inc.
    4. Millard, Stephen & Scott, Andrew & Sensier, Marianne, 1997. "The Labour Market over the Business Cycle: Can Theory Fit the Facts?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(3), pages 70-92, Autumn.
    5. Finn E. Kydland, 1993. "Business cycles and aggregate labor-market fluctuations," Working Papers (Old Series) 9312, Federal Reserve Bank of Cleveland.
    6. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    7. Jaakko Pehkonen & Hannu Tervo, 1998. "Persistence and Turnover in Regional Unemployment Disparities," Regional Studies, Taylor & Francis Journals, vol. 32(5), pages 445-458.
    8. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-755, September.
    9. Chiara Bentivogli & Patrizio Pagano, 1999. "Regional Disparities and Labour Mobility: the Euro‐11 versus the USA," LABOUR, CEIS, vol. 13(3), pages 737-760, September.
    10. James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1261-1282.
    11. Paolo Mauro & Antonio Spilimbergo, 1999. "How Do the Skilled and the Unskilled Respond to Regional Shocks?: The Case of Spain," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 1-1.
    12. Pissarides, Christopher A & McMaster, Ian, 1990. "Regional Migration, Wages and Unemployment: Empirical Evidence and Implications for Policy," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 812-831, October.
    13. Maria Demertzis & Andrew Hughes Hallett, 1996. "Regional Inequalities and the Business Cycle: An Explanation of the Rise in European Unemployment," Regional Studies, Taylor & Francis Journals, vol. 30(1), pages 15-29.
    14. Clark, Todd E, 1998. "Employment Fluctuations in U.S. Regions and Industries: The Roles of National, Region-Specific, and Industry-Specific Shocks," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 202-229, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sari Pekkala & Hannu Tervo, 2002. "Unemployment and Migration: Does Moving Help?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 621-639, December.
    2. Kangasharju, Aki & Pekkala, Sari, 2002. "Adjustment to Regional Labour Market Shocks," Discussion Papers 274, VATT Institute for Economic Research.
    3. Petri Böckerman & Kari Hämäläinen & Mika Maliranta, 2004. "Sources of Job and Worker Flows: Evidence from a Panel of Regions," LABOUR, CEIS, vol. 18(1), pages 105-129, March.
    4. Torben Dall Schmidt & Aki Kangasharju & Daniel Rauhut, 2011. "Population Changes and Regional Economic Growth in the Nordic Countries 1994-2006," ERSA conference papers ersa10p922, European Regional Science Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kangasharju, Aki & Pekkala, Sari, 2002. "Adjustment to Regional Labour Market Shocks," Discussion Papers 274, VATT Institute for Economic Research.
    2. Paul Cavelaars & Jeroen Hessel, 2007. "Regional Labour Mobility in the European Union: Adjustment Mechanism or Disturbance?," DNB Working Papers 137, Netherlands Central Bank, Research Department.
    3. Fidrmuc, Jan, 2001. "Migration and adjustment to shocks in transition economies," ZEI Working Papers B 23-2001, University of Bonn, ZEI - Center for European Integration Studies.
    4. Fredrik Carlsen & Kåre Johansen & Knut RØed, 2006. "Wage Formation, Regional Migration and Local Labour Market Tightness," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 423-444, August.
    5. Marelli, Enrico, 1999. "Convergence and asymmetries in the employment dynamics of the European regions," ERSA conference papers ersa99pa120, European Regional Science Association.
    6. Fidrmuc, Jan, 2004. "Migration and regional adjustment to asymmetric shocks in transition economies," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 230-247, June.
    7. Kangasharju, Aki & Pekkala, Sari, 2000. "The Effect Of Aggregate Fluctuations On Regional Economic Disparities In Finland," ERSA conference papers ersa00p26, European Regional Science Association.
    8. Elhorst, J. Paul, 2000. "The Mystery Of Regional Unemployment Differentialsa Survey Of Theoretical And Empirical Explanations," ERSA conference papers ersa00p60, European Regional Science Association.
    9. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    10. Enrique Lopez-Bazo & Tomas Del Barrio & Manuel Artis, 2005. "Geographical distribution of unemployment in Spain," Regional Studies, Taylor & Francis Journals, vol. 39(3), pages 305-318.
    11. repec:dgr:rugsom:00c06 is not listed on IDEAS
    12. Jan Fidrmuc, 2002. "Migration and Regional Adjustment and Asymmetric Shocks in Transition Economies," William Davidson Institute Working Papers Series 441, William Davidson Institute at the University of Michigan.
    13. McCormick, Barry, 1997. "Regional unemployment and labour mobility in the UK," European Economic Review, Elsevier, vol. 41(3-5), pages 581-589, April.
    14. Tani, Massimiliano, 2003. "Have Europeans become more mobile? A note on regional evolutions in the EU: 1988-1997," Economics Letters, Elsevier, vol. 80(1), pages 23-30, July.
    15. Ines Murillo & Fernando Núñez & Carlos Usabiaga, 2005. "Differentials and persistence in unemployment - an analysis of the Spanish regions with the highest unemployment rates," ERSA conference papers ersa05p278, European Regional Science Association.
    16. Blackaby, David H. & Drinkwater, Stephen, 2004. "Migration and Labour Market Differences: The Case of Wales," IZA Discussion Papers 1275, Institute of Labor Economics (IZA).
    17. Persyn, Damiaan & Brandsma, Andries & Kancs, d’Artis, 2014. "Modelling Migration and Regional Labour Markets: an Application of the New Economic Geography Model RHOMOLO," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 29, pages 372-407.
    18. Matteo Lanzafame, 2010. "The nature of regional unemployment in Italy," Empirical Economics, Springer, vol. 39(3), pages 877-895, December.
    19. David C Maré & Wai Kin Choy, 2001. "Regional Labour Market Adjustment and the Movements of People: A Review," Treasury Working Paper Series 01/08, New Zealand Treasury.
    20. Hannu Tervo, 2000. "Migration and Labour Market Adjustment: Empirical evidence from Finland 1985-90," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(3), pages 343-360.
    21. Joshua H. Gallin, 1999. "Net migration and state labor market dynamics," Finance and Economics Discussion Series 1999-16, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:labour:v:16:y:2002:i:2:p:267-286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/csrotit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.