Some Unpleasant Arithmetics of Regional Unemployment in the EU. Are there any lessons for EMU?.

Several studies have documented the weak response of regional wages differentials and labour mobility following region-specific ("idiosyncratic") shocks in the average of the EU countries. This has been often taken as evidence of the rigidity of labour markets in European countries, as opposed to the flexbility of the USA. However, as such shocks by definition average to zero, one cannot make an explicit kink between the (lack of) adjustment at regional level and aggregate unemployment. This paper tries to provide a better understanding of the regional distribution of unemployment and why region-specific shocks can matter aggregate unemployment.