Regional Labour Market Dynamics in Europe

The paper investigates regional labour markets dynamics in Europe and compares the results to those obtained for the United States. It analyses to what extent regional employment dynamics are common to all regions in Europe and to all states in the United States. It finds that a higher proportion of movements in employment growth is common to all US states than to all EEC regions. Next, the paper studies the adjustment mechanisms that a typical region specific shock triggers. It shows that for Europe, for the first three years, most of the shock is absorbed by changes in the participation rate while, in the United States, it is immediately reflected in migration. Surprisingly, in both cases, the unemployment rate plays a small role, suggesting the presence of natural unemployment rates at the regional level.