Reg. Lbr Mrkt Model 1

by Simon G. Fauser

Regional Competitiveness & Employment – a regional labour

market model

PhD in Quantitative Methods for Policy Analysis, Università Cattolica del Sacro Cuore, Piacenza, Italy –

Simon Georg Fauser

Reg. Lbr Mrkt Model 2

by Simon G. Fauser

Need & Goal

Base Model

PossibleExtensions

EU integration, common currency EU market transparency EU regions heterogenous, different structural

characteristics Need for regional studies being tools for detecting &

comparing:

structurally weak <-> strong, competitive regions

Detecion & discussion of success factors of

prosperous regions (low unemployment rate)

<-> reasons for structural weaknesses &

losses of competitiveness of suffering regionsGoal:

Formulation of strategies to overcome deficencies

Reg. Lbr Mrkt Model 3

by Simon G. Fauser

Industrial policy may play a crucial role in stimulating Labour demand and supply -> regional growth process

Need & Goal

Base Model

PossibleExtensions

The base model is a macroeconometric model by

Prof. Baussola (Unicatt) Regional econometric model in which labour

demand and supply are endogenously determined ->

unemployment determined by their interaction Model evaluates response of regional and national

labour market to exogenous demand and supply

shocks He finds by intersectoral difference that industry,

although declining in trems of employment still

maintains a crucial role in generating employment

multiplier effects.

Reg. Lbr Mrkt Model 4

by Simon G. Fauser

Need & Goal

Base Model

PossibleExtensions

Main structure of the model:

LD:

EEAGR(i)=g1(VAAGR(i), WAGR(i)/DEFAGR(i), TFPAGR(i))

EEIND(i)=g2(VAIND(i),WIND(i),DEFIND(i),TFPIND(i))

EESER(i)=g3(VASER(i),WSER(i)/DEFSER(i),TFPSER(i))

LD (value added, factor cost, proxy of tech prog.

Adjustm. Process: lagged end. var. (ind. by VA growth rate)

COBB-DOUGLAS

LS:

SE(i)=g4(PROFSE(i),UR(i),YU(i))

PR(i)=g5(SE/POP(i), EE/POP(i), IMMIG(i))

self empl. (Neo-classical): profits, struc. Var (UR, YU)-> se

seen as response to adverse job market oppotunities

discouraged worker hypothesis (TELLA 1964): Var. in LS

reflect var. in LD by fluc. in part. rate (Adj. lagged var)

LD

LS

Reg. Lbr Mrkt Model 6

by Simon G. Fauser

Need & Goal

Base Model

PossibleExtensions

UR(i)== (LF(i)-TEE(i)/LF(i)*100) end. determined by

interaction of labour force (PR*POP) & total empl.

(alpha*(TE(i))

estimation method: Least Squares

Finds some variables significant others not…

Models some shocks (1% change of resp. variable) (like

inc. VAIND, or WSER…)

Data source: ISTAT, 1970-2000

Reg. Lbr Mrkt Model 7

by Simon G. Fauser

Need & Goal

Base Model

PossibleExtensions

comparison of Baussola’s model with “13

sets” of Elhorst (2000, The mystery of regional

unemployment differentials)

Possible extensions considering Elhorst:

Factors affecting mainly labour supply:

- migration not only from abroad also within region

- Commuting effects

- Degree of unionisation (-> speed of adjustment)

- educational qualification

Factors affecting mainly labour demand:

- further decompose the sectoral mix

Starting point

Reg. Lbr Mrkt Model 8

by Simon G. Fauser

Need & Goal

Base Model

PossibleExtensions

Further possible extensions:

- fiscal policy variables (e.g. subsidies, incorporate

taxes) (affects labour demand)

- influence of regionally differentiated social benefits

- introducing a spatial variable

- regionally specific R&D policy->Innovation…

- considering smaller regions

- show shock impacts to UR of considered regions

with geographical software

Application of extended Model: Interregional comparison:

1) Baden-Württemberg : Mecklenburg-Vorpommern

2) Baden-Würrtemberg : Lombardei

3)…

Application

Reg. Lbr Mrkt Model 9

by Simon G. Fauser

Need & Goal

Base Model

PossibleExtensions

Which estimation method?

- Error Correction Model (Maximum likelihood

estimation)

- Seemingly unrelated regression to take account of

possible comovements between equations

- …

Which estimation method?