IDEAS home Printed from https://ideas.repec.org/p/uwa/wpaper/07-05.html
   My bibliography  Save this paper

Regional Unemployment Disparities: An Evaluation of Policy Measures

Author

Listed:
  • Nicolaas Groenewold

    (UWA Business School, The University of Western Australia)

  • Alfred Hagger

    (School of Economics, The University of Tasmania)

Abstract

This paper analyses the efficacy of regional and federal government policies in reducing inter-regional unemployment disparities. We use as our framework a two-region general equilibrium model with a given freely-mobile supply of labour. We assume interregional migration to occur in response to inter-regional utility differentials. Each region has households, firms and a regional government. In addition to regional governments, there is a federal government. The firms in a region use a single factor, labour, to produce a single good which we assume to be different to that produced in the other region. It is supplied to households and to the regional government in the form of payroll taxes. Households consume some, trade some with households in the other region and give some up to the federal government as income tax. Firms and households bargain over wages and firms then choose employment to maximise profits. The resulting equilibrium will generally not be a full-employment one. We simulate a linearised numerical version of the model. We examine seven alternative policies, six carried out by a regional government and one by the federal government. In the first group there are traditional tax/expenditure polices as well as policies which might be seen as attacking the natural rate of unemployment: changes in unemployment benefits, changes in union power, changes in the labour force and changes in labour productivity. The federal government policy is a regionally- differentiated fiscal policy. Contrary to expectations, many policies which have traditionally been recommended to alleviate unemployment, are found, in fact, to exacerbate the unemployment problem.

Suggested Citation

  • Nicolaas Groenewold & Alfred Hagger, 2007. "Regional Unemployment Disparities: An Evaluation of Policy Measures," Economics Discussion / Working Papers 07-05, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:07-05
    as

    Download full text from publisher

    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2007/07_05_Groenewold.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicolaas Groenewold, 1997. "Does Migration Equalise Regional Unemployment Rates? Evidence From Australia," Papers in Regional Science, Wiley Blackwell, vol. 76(1), pages 1-20, January.
    2. Jeffrey Petchey & Perry Shapiro, 2000. "The Efficiency of State Taxes on Mobile Labour Income," The Economic Record, The Economic Society of Australia, vol. 76(234), pages 285-296, September.
    3. Elias, D Peter B, 1980. "Regional Unemployment Differentials: A Restatement of the Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 27(1), pages 103-105, February.
    4. Nicolaas Groenewold & Alfred J. Hagger & John R. Madden, 2001. "Competitive Federalism: A Political-Economy General Equilibrium Approach," Economics Discussion / Working Papers 01-10, The University of Western Australia, Department of Economics.
    5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, December.
    6. Bell, David N F, 1981. "Regional Output: Employment and Unemployment Fluctuations," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 42-60, March.
    7. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
    8. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
    9. repec:bla:ecorec:v:78:y:2002:i:241:p:175-85 is not listed on IDEAS
    10. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2001. "Widening differences in Italian regional unemployment," Labour Economics, Elsevier, vol. 8(1), pages 103-129, January.
    11. Nicolaas Groenewold & Alfred Hagger & John Madden, 2003. "Interregional transfers: A political-economy CGE approach," Economics of Governance, Springer, vol. 82(4), pages 535-554, November.
    12. Elias, D Peter B, 1979. "Regional Unemployment Elasticities: Migration or Registration?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 26(1), pages 103-106, February.
    13. Gordon, Ian, 1979. "Regional Unemployment Elasticities: The Neglected Role of Migration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 26(1), pages 97-101, February.
    14. Jaakko Pehkonen & Hannu Tervo, 1998. "Persistence and Turnover in Regional Unemployment Disparities," Regional Studies, Taylor & Francis Journals, vol. 32(5), pages 445-458.
    15. McGuire, P, 2001. "Regional unemployment in Queensland: Dimensions and policy issues," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 27(4), pages 296-313.
    16. repec:bla:ecorec:v:71:y:1995:i:215:p:343-53 is not listed on IDEAS
    17. repec:bla:ecorec:v:77:y:2001:i:238:p:252-69 is not listed on IDEAS
    18. Stephan Weiler, 2001. "Unemployment in Regional Labor Markets: Using Structural Theories to Understand Local Jobless Rates in West Virginia," ILR Review, Cornell University, ILR School, vol. 54(3), pages 573-592, April.
    19. Madden, John Robert & Groenewold, Nicolaas & Hagger, Alfred James, 2000. "Competitive Federalism: A Bargain-Theoretic General Equilibrium Approach," ERSA conference papers ersa00p425, European Regional Science Association.
    20. Robert Dixon & David Shepherd, 2001. "Trends and Cycles in Australian State and Territory Unemployment Rates," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 252-269, September.
    21. repec:bla:ecorec:v:76:y:2000:i:234:p:285-96 is not listed on IDEAS
    22. Jeffrey D. Petchey & Perry Shapiro, 2002. "State Tax and Policy Competition For Mobile Capital," The Economic Record, The Economic Society of Australia, vol. 78(241), pages 175-185, June.
    23. Elias, D Peter B, 1978. "Regional Unemployment Elasticities: Further Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 25(1), pages 89-96, February.
    24. Gavin Cameron & John Muellbauer, 2001. "Earnings, unemployment, and housing in Britain," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 203-220.
    25. Guy Debelle & James Vickery, 1999. "Labour Market Adjustment: Evidence on Interstate LabourMobility," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 32(3), pages 249-263, September.
    26. Myers, Gordon M., 1990. "Optimality, free mobility, and the regional authority in a federation," Journal of Public Economics, Elsevier, vol. 43(1), pages 107-121, October.
    27. repec:kap:jeczfn:v:82:y:2003:i:4:p:535-554 is not listed on IDEAS
    28. Petchey, Jeffrey D, 1993. "Equalisation in a Federal Economy with Inter-state Migration," Australian Economic Papers, Wiley Blackwell, vol. 32(61), pages 336-354, December.
    29. Frank Brechling, 1967. "Trends And Cycles In British Regional Unemployment," Oxford Economic Papers, Oxford University Press, vol. 19(1), pages 1-21.
    30. A. P. Thirlwall, 1966. "Regional Unemployment As A Cyclical Phenomenon1," Scottish Journal of Political Economy, Scottish Economic Society, vol. 13(2), pages 205-219, June.
    31. Gordon, Ian, 1980. "Regional Unemployment Differentials: Migration not Registration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 27(1), pages 97-102, February.
    32. Dixon, R. & Shepherd, D. & Thomson, J., 2000. "Regional Unemployment Disparities," Department of Economics - Working Papers Series 737, The University of Melbourne.
    33. Jeffrey Petchey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 343-353, December.
    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. N. Groenewold & A.J. Hagger, 2008. "Regional Unemployment Disparities: An Evaluation Of Policy Measures," Australian Economic Papers, Wiley Blackwell, vol. 47(4), pages 355-375, December.

    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. Nicolaas Groenewold & A.J. Hagger, 2004. "Regional Unemployment Disparities: Can Fiscal Policy Help?," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 13-37, March.
    2. N. Groenewold & A.J. Hagger, 2008. "Regional Unemployment Disparities: An Evaluation Of Policy Measures," Australian Economic Papers, Wiley Blackwell, vol. 47(4), pages 355-375, December.
    3. Anping Chen & Nicolaas Groenewold, 2013. "The national and regional effects of fiscal decentralisation in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(3), pages 731-760, December.
    4. Anping Chen & Nicolaas Groenewold, 2011. "Regional Equality and National Development in China: Is There a Trade‐Off?," Growth and Change, Wiley Blackwell, vol. 42(4), pages 628-669, December.
    5. Nicolaas Groenewold & A. J. Hagger, 2003. "Regional Unemployment Disparities: Can Fiscal Policy Help?," Economics Discussion / Working Papers 03-20, The University of Western Australia, Department of Economics.
    6. Matteo Lanzafame, 2010. "The nature of regional unemployment in Italy," Empirical Economics, Springer, vol. 39(3), pages 877-895, December.
    7. Elhorst, J. Paul, 2000. "The Mystery Of Regional Unemployment Differentialsa Survey Of Theoretical And Empirical Explanations," ERSA conference papers ersa00p60, European Regional Science Association.
    8. Hikaru Ogawa, 2004. "Fiscal Externality, Rent Sharing and Equalisation Transfers in Japan," Urban Studies, Urban Studies Journal Limited, vol. 41(1), pages 195-205, January.
    9. repec:dgr:rugsom:00c06 is not listed on IDEAS
    10. Robert Dixon & David Shepherd & James Thomson, 2001. "Regional Unemployment Disparities in Australia," Regional Studies, Taylor & Francis Journals, vol. 35(2), pages 93-102.
    11. J. Paul Elhorst, 2003. "The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 709-748, December.
    12. Robert Dixon & David Shepherd, 2001. "Trends and Cycles in Australian State and Territory Unemployment Rates," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 252-269, September.
    13. Maria Francesca Cracolici & Miranda Cuffaro & Peter Nijkamp, 2007. "Geographical Distribution of Unemployment: An Analysis of Provincial Differences in Italy," Growth and Change, Wiley Blackwell, vol. 38(4), pages 649-670, December.
    14. David Gray, 2004. "Persistent Regional Unemployment Differentials Revisited," Regional Studies, Taylor & Francis Journals, vol. 38(2), pages 167-176.
    15. Anping Chen & Nicolaas Groenewold, 2014. "The regional economic effects of a reduction in carbon emissions and an evaluation of offsetting policies in China," Papers in Regional Science, Wiley Blackwell, vol. 93(2), pages 429-453, June.
    16. Jeff Petchey & Sophia Levtchenkova, 2004. "Fiscal Capacity Equalization and Economic Efficiency," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0415, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    17. David Shepherd & Robert Dixon, 2002. "The Relationship Between Regional and National Unemployment," Regional Studies, Taylor & Francis Journals, vol. 36(5), pages 469-480.
    18. repec:rre:publsh:v:35:y:2005:i:1:p:38-63 is not listed on IDEAS
    19. Tsunetada Hirobe, 2015. "Economic shift-share effects and spatial agglomeration regarding inter-regional disparities of labour market in the USA," Regional Science Policy & Practice, Wiley Blackwell, vol. 7(3), pages 103-117, August.
    20. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
    21. Mitsui, Kiyoshi & Sato, Motohiro, 2001. "Ex ante free mobility, ex post immobility, and time consistency in a federal system," Journal of Public Economics, Elsevier, vol. 82(3), pages 445-460, December.
    22. Casella, Alessandra, 2005. "Redistribution policy: A European model," Journal of Public Economics, Elsevier, vol. 89(7), pages 1305-1331, July.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:uwa:wpaper:07-05. 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: Sam Tang (email available below). General contact details of provider: https://edirc.repec.org/data/deuwaau.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.