Spanish Regional Unemployment Revisited: The Role of Capital Accumulation

Bande R. and Karanassou M. Spanish regional unemployment revisited: the role of capital accumulation, Regional Studies. This paper provides new evidence for the evolution of regional unemployment rates in Spain over the period between 1980 and 2000. It argues that interactive dynamic systems of labour demand, wage setting and labour force equations (1) allow for a richer interpretation of regional disparities, and (2) can capture the unemployment effects of growing variables such as capital stock. After classifying the seventeen Spanish regions into high and low unemployment groups using kernel and cluster techniques, a structural labour market model is estimated for each group and the unemployment contributions of investment, benefits, taxes and the oil price are evaluated. It is found that the main driving force of regional unemployment swings is capital accumulation.