Essays on Regional Labour Markets in Spain

Abstract

This thesis analyses the impact of the recession on the regional labour markets in Spain by considering three different aspects: the regional unemployment sensitivity to economic variations, the minimum wage effect on youth employment rate and finally, the role of the labour market determinants on internal migration. Firstly, we explore the inverse relationship between unemployment and GDP for the Spanish provinces and the period ranging 1985-2013. After testing the time series properties of provincial GDP and unemployment, we specify static and dynamic versions of the Okun’s law using VAR and PVAR techniques. Both static and dynamic analyses lead us to determine that provinces show large differences in their unemployment sensitivity to GDP shocks. In particular, provinces that show less diversified industries, a more developed services sector and higher rates of labour participation suffer from higher variations in unemployment rates. In the following analysis we evaluate the effect of minimum wages on regional employment rates, taking especially into consideration its influence on youth employment. The work contributes to the literature by focusing on the analysis of a recessionary period but also by considering spatial effects in order to capture the interactions between regional labour markets. The obtained results have shown a negative but quite small effect of the Kaitz index on the employment rate. The disaggregation of youth population into different age groups has allowed us to identify that the youth group most affected by minimum wages is the one between 20 and 24 years old, which is the most common age group of workers that face the school-to-work transition. Finally, we analyse the main determinants of migration between 45 Spanish Functional Urban Areas during the period of the recent economic downturn, in which factors traditionally related to internal migration such as real wages and employment have greatly declined. In order to perform the analysis, we have resorted to a gravity model for bilateral migration flows where several controls and different complex structures of fixed effects have been included in order to avoid potential endogeneity problems as a consequence of variables omission. Results show that real average wages are relevant migration determinants. They exert a strong influence, especially in foreigners and returned nationals and also, they behave as expected for the working age groups. However, the effect of employment rate on migration flows is less clear. The inconclusive results on the role of employment rate on migration are in line with results obtained in eighties and early nineties highly instability period, when migration phenomenon was labelled as “an enigma”.