Unemployment dynamics in West Germany : do districts adjust differently than larger regional units?

"The results for labour demand shocks at the place of residence for German Federal States and districts according to the model of regional adjustment developed by Blanchard/Katz (1992) are in line with other studies in this field. They suggest that adjustment to region-specific shocks in the year of the shock is mainly through participation behaviour and unemployment changes, not by migration. If, however, the estimations additionally allow for commuting as adjustment mechanism, the unemployment rate and interregional mobility (i.e. migration and commuting activities) capture the major part of the regional adjustment process. Thus, migration and commuting are highly relevant for the adjustment behaviour of districts as well as for Federal States. As the major part of the shock has settled within only about one to two years, slow working adjustment mechanisms in the aftermath of labour demand shocks are not responsible for persistent unemployment differentials. Furthermore, the hypothesis that the adjustment process for smaller spatial units is much more reflected in interregional mobility and less in changes in the unemployment and the participation rate is confirmed." (Author's abstract, IAB-Doku) ((en))