Persistent Regional Unemployment Differentials Revisited

Gray D. (2004) Persistent regional unemployment differentials revisited, Reg. Studies 38, 167-176. Based on bivariate and multivariate cointegration, three inferences concerning the nature of the British regional unemployment rates are drawn. First, regional unemployment rates are characterized by long-run, persistent relationships. The differentials are maintained by equilibrating systemic forces that induce co-movements of rates in the long-run, implying that decreasing the national rate of unemployment will reduce regional rates, but not eliminate differentials. Second, multivariate cointegration provides a richer picture of unemployment co-movements compared with bivariate analysis. Third, East Anglia does not revert to an equilibrium relationship with the other regions, suggesting that it is not constrained to follow the common trends driving the British regional system in the long-run.