International and Interregional Differences in Employment and Unemployment Rates

In the mid nineties of last century unemployment was perceived in several countries as one of the most disruptive social problems. Several economists, sociologists and policymakers proposed of reducing by law working hours as the only effective strategy for diminishing unemployment. In the last decade employment has increased significantly in almost all countries and average rates of unemployment have diminished. Inside a few large countries there are however some regions where rates of employment are still very low and unemployment remains a disruptive social problem. In the analytical framework of international economics this result appears quite disappointing, since relatively less efficient regions which belong to relatively rich nations can usually benefit from substantial transfers from relatively more productive regions, and have hence the possibility of stimulating employment through more expansionary fiscal policies. This paradoxical result stems from the fact that the comparative advantage of regions as far as fiscal policy is concerned is more than outweighed by their comparative disadvantage from the point of view of the possibility of compensating their lower productivity by means of a lower price for labour.