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Disparities In Economic Growth And Unemployment Across The European Regions: A Sectoral Perspective
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Disparities In Economic Growth And Unemployment Across The European Regions: A Sectoral Perspective

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Abstract

The picture on disparities in productivity growth and in unemployment across European regions reveals the existence of a slow and not very systematic convergence of labor productivity toward a common level, and of an even more uncertain convergence of unemployment rates. This paper uses a unified framework to study both phenomena. We adopt a three-sector perspective (agriculture, industry and services) to assess whether sectoral dynamics helps explaining the observed heterogeneity in the growth and employment regional performances. The main theoretical hypotheses upon which our empirical investigation is based are obtained by models on the dual-economy (e.g. Mas Colell and Razin 1973), where predictions on how out-migration from agriculture can generate convergence are formulated; and by Baumol (1967), where the role of an expansion of services on aggregate growth is studied. Part of our evidence is based on the use of cluster analysis to identify subsets of regions homogeneous in terms of variables such as sectoral dynamics, labor market dynamics, and overall productivity growth. The results are largely consistent with the adopted theoretical framework. Regions that start from a low agricultural share are the richest and grow relatively slowly; regions that start from very high agricultural shares are characterized by a fast decline of that share and by higher than average growth rates; they also show a limited decline in their employment rates. Regions specialized in service activities show a particularly slow rate of productivity growth and a rising employment rate. More generally, we find a large body of evidence suggesting that convergence in aggregate productivity is strongly associated with out-migration from agriculture, and that the magnitude of the impact of the latter on aggregate regional growth depends significantly on which sector absorbs the migrating workers.

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  • R. Paci & F. Pigliaru & M. Pugno, 2001. "Disparities In Economic Growth And Unemployment Across The European Regions: A Sectoral Perspective," Working Paper CRENoS 200103, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:200103
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    References listed on IDEAS

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    1. Fabio Canova & Albert Marcet, 1995. "The poor stay poor: Non-convergence across countries and regions," Economics Working Papers 137, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
    2. Caselli, Francesco & Coleman II, Wilbur John, 1999. "How Regions Converge," CEPR Discussion Papers 2191, C.E.P.R. Discussion Papers.
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    Cited by:

    1. M. Hakan Berument & Nukhet Dogan & Aysit Tansel, 2009. "Macroeconomic Policy and Unemployment by Economic Activity: Evidence from Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 45(3), pages 21-34, May.
    2. R. Naylor, 2001. "Firm profits and the number of firms under unionised oligopoly," Working Paper CRENoS 200109, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. Gianni Guastella & Francesco Timpano, 2012. "Increasing Returns, Decreasing Returns and Regional Economic Convergence in the EU," ERSA conference papers ersa12p344, European Regional Science Association.
    4. MG. Ladu, 2006. "Total Factor Productivity Estimates: Some Evidence from European Regions," Working Paper CRENoS 200606, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    5. MG. Ladu, 2005. "Total Factor Productivity Growth and Employment: A Simultaneous Equations Model Estimate," Working Paper CRENoS 200506, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    6. R. Naylor, 2001. "Industry profits and market size under bilateral oligopoly," Working Paper CRENoS 200108, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    7. Maria Gabriela Ladu, 2010. "Total Factor Productivity Estimates: Some Evidence from European Regions," WIFO Working Papers 380, WIFO.
    8. MG. Ladu, 2005. "Growth and Employment: A survey on the Demand Side of the Labour Market," Working Paper CRENoS 200507, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    9. Augustine C Osigwe & Kenneth O Ahamba, 2016. "Macroeconomic conditions and unemployment in Nigeria," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(6), pages 21-28, December.
    10. Sergio Destefanis & Giuseppe Mastromatteo, 2009. "Labor-market Performance in the OECD--An Assessment of Recent Evidence," Economics Working Paper Archive wp_559, Levy Economics Institute.

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    More about this item

    Keywords

    growth; unemployment; structural change; europe;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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