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Ageing shocks and short-run regional labour market dynamics in a spatial panel VAR approach

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  • Timo Mitze
  • Torben Dall Schmidt
  • Daniel Rauhut
  • Aki Kangasharju

Abstract

Using a flexible spatial panel VAR model for a small-scale labour market system, we investigate the dynamic interdependences between changes in the demographic structure and the labour market performance of a regional economy. With a particular focus on ageing shocks, we describe an increase in the share of elderly in regional population due to exogenous changes in the institutional context, such as pension reforms. The regional labour market implications of an ageing shock are then tested with regard to the effects on employment growth, unemployment and labour participation rate. Our results based on a sample of 71 Scandinavian regions point to negative regional labour market effects of an ageing shock implying a reduction in employment growth and a temporarily declining labour participation rate, while the unemployment rate increases. Importantly, spatial spillovers amplify these negative impacts through a marginalization of macro-regional labour markets. As a robustness check, we reverse the causal ordering and analyze the responses to a positive macroeconomic shock which initially increases employment growth. We find direct and spatially indirect adjustment patterns characterized by a reduction of the unemployment rate, an increase in the labour participation rate and a decrease in the share of elderly in the population.

Suggested Citation

  • Timo Mitze & Torben Dall Schmidt & Daniel Rauhut & Aki Kangasharju, 2018. "Ageing shocks and short-run regional labour market dynamics in a spatial panel VAR approach," Applied Economics, Taylor & Francis Journals, vol. 50(8), pages 870-890, February.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:8:p:870-890
    DOI: 10.1080/00036846.2017.1346360
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    References listed on IDEAS

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    1. Clarence D. Long, 1958. "The Labor Force under Changing Income and Employment," NBER Books, National Bureau of Economic Research, Inc, number long58-1.
    2. Kangas, Olli & Lundberg, Urban & Ploug, Niels, 2006. "Three routes to a pension reform. Politics and institutions in reforming pensions in Denmark, Finland and Sweden," Arbetsrapport 2006:10, Institute for Futures Studies.
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    Cited by:

    1. Sven Wardenburg & Thomas Brenner, 2019. "The impact of place-based policies on perceived regional living conditions across German labor market regions. Examining the impacts on migration flows," Working Papers on Innovation and Space 2019-02, Philipps University Marburg, Department of Geography.
    2. Boeing, Philipp & Eberle, Jonathan & Howell, Anthony, 2022. "The impact of China's R&D subsidies on R&D investment, technological upgrading and economic growth," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    3. Jonathan Eberle & Thomas Brenner & Timo Mitze, 2020. "Public Research, Local Knowledge Transfer, and Regional Development: Insights from a Structural VAR Model," International Regional Science Review, , vol. 43(6), pages 555-586, November.
    4. Jonathan Eberle & Philipp Boeing, 2019. "Effects of R&D subsidies on regional economic dynamics: Evidence from Chinese provinces," Working Papers on Innovation and Space 2019-03, Philipps University Marburg, Department of Geography.
    5. Sven Wardenburg & Thomas Brenner, 2021. "Analysing the spatio-temporal diffusion of economic change - advanced statistical approach and exemplary application," Working Papers on Innovation and Space 2021-01, Philipps University Marburg, Department of Geography.
    6. Patricia Abelairas-Etxebarria & Inma Astorkiza, 2020. "Space-Time Analysis of Migrations, Employment, and Housing as A Basis for Municipal Sustainable Urban Planning," Sustainability, MDPI, vol. 12(6), pages 1-13, March.

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