AIEL Series in Labour Economics: Geographical Labor Market Imbalances
This chapter is devoted to the investigation of spatial spillover effects of the regional unem- ployment in Germany. Due to historical reasons the differences between eastern and western regions of Germany persist over time. We explore the differences in the determinants of the re- gional unemployment as well as the differences in spatial effects by estimating spatial models. We use panel data for 407 out of 413 German regions (using the NUTS III regional structure) for 2001 through 2009. In order to account for possible spatial interactions between regions, we use a spatial weighting matrix of inverse distances. We estimate static and dynamic models by the maximum likelihood estimation approach, developed by Anselin (1988) specifically for spatial models and elaborated by Lee and Yu (2010a), Lee and Yu (2010b). We reveal that the unemployment in western regions is more of disequilibrium nature, while the unemployment in eastern regions is more of equilibrium nature. Using System-GMM approach we estimate the extended specification of the dynamic model and find that the unemployment in eastern regions affects both the unemployment in western and eastern regions of Germany, whereas the unemployment in western regions has an impact only on other western regions.
In this chapter, we provide evidence on compensating differentials in the labour market from the largest transition economy, Russia. Using the NOBUS micro-data and a methodology based on the estimation of the wage equation augmented by aggregate regional characteristics, we show that wage differentials across Russian regions have a compensative nature. Russian workers receive wage compensations for living in regions with a higher price level and worse non-pecuniary characteristics, such as a relatively low life expectancy, a high level of air pollution, poor medical services, a colder climate and a higher unemployment level. These compensations are not associated with the existing government system of compensating wage coefficients. After adjusting for regional amenities and disamenities, regional wages become positively correlated with interregional migration flows. According to our estimates, wage compensations along with differences in employment composition are able to account for about three fourths of the observed variation in wages across Russia regions.