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Matching Inefficiencies, Regional Disparities, and Unemployment
Author(s) -
Hynninen SannaMari,
Kangasharju Aki,
Pehkonen Jaakko
Publication year - 2009
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.2009.00460.x
Subject(s) - inefficiency , unemployment , economics , matching (statistics) , frontier , structural unemployment , labour economics , percentage point , seekers , aggregate (composite) , demographic economics , unemployment rate , econometrics , microeconomics , macroeconomics , geography , mathematics , statistics , finance , materials science , archaeology , composite material , political science , law
. In this paper we apply a stochastic frontier approach to examine how matching inefficiencies and regional disparities in structural factors contribute to regional and aggregate unemployment. Our results suggest that there would be a substantial decline in aggregate unemployment if (i) all local labour offices operated with full efficiency or (ii) they shared the same structure of job seekers and vacant jobs as the most favourable office. In the former case an increase in hirings would lower the average unemployment rate by 2.4 percentage points. In the latter case the decrease would be 1.4 percentage points. Further, we find that fixed effects are positively correlated with both a more favourable structure and higher efficiency. This suggests that the fixed effects may capture some part of time‐invariant features in the structure and inefficiency. Thus, the role of structural factors and inefficiency in regional unemployment disparities may be higher than estimated.