The crisis and regional employment in Europe: what role for sheltered economies?

This paper examines how the evolution of employment trends in the regions of Europe since the outbreak of the crisis may have been shaped by the emergence of sheltered economies in certain regions of Europe in the pre-crisis period. The paper uses descriptive and econometric analysis to determine the relationship between the level of protection from the market of regional economies in the years of economic boom between 1995 and 2007 and employment trends in the first four years of the crisis (2008-2012). The analysis covers 272 NUTS2-level regions in 27 EU countries. The results of the analysis show that regions which had developed more sheltered economies during the boom years have not weathered the employment shock associated with the crisis well, while pre-crisis dynamism in employment generation has been connected to lower post-crisis employment destruction. The only exception are the most highly sheltered economies in the pre-crisis period, which have endured a lower level of job destruction than any other type of region. The question is whether this early resistance to job destruction can be maintained once the recovery starts.