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4. 4 Determinants of regional labour market performance: econometric analyses.

In this section, in order to examine the determinants of regional labour market performance, we present results from the specification of various models by means of econometric (cross-section and panel data) estimates (29).

4. 4.1 Database and estimation details and strategy

As the determinants of (un)employment differences and dynamics across EU-15 regions are extremely difficult to examine, we preferred to estimate and present empirical results from many equations (with different sub-sets of explicative variables) by means of various econometric approaches. The set of explicative variables (30) may be separated into four groups: (i) development/growth and sectoral indicators; (ii) price variables (labour cost); (iii) institutional indicators; (iv) other variables. In the first group, we consider per capita GDP as an indicator of economic development and the sectoral composition of employment as structural/development variables. In some estimates, we also consider per capita GDP growth rates. As price variables, we use the hourly labour cost in industry and services. The set of institutional variables is particularly large for labour market institutions (EPL, fiscal wedge, degrees of centralisation, co-ordination and coverage of collective wage bargaining, active and passive labour market policies, weekly working time, spread of part-time), but it also includes an indicator of product market regulation. We

are aware of the huge difficulties in assessing the labour market performance effects of institutions and institutional changes (e.g., due to the uncertain shape and duration of the distribution of the impact over time). In spite of the (partial) limitations due to the short period considered and the lack of some data, we also consider institutional changes over time and across regions using "weight variables" at regional level. Of course, the short period considered may lead to under- or over-estimations or to the emergence of unexpected relationships. For example, although in a long-run perspective it is difficult to predict a clear and stable relationship between employment protection legislation and labour market performance, in the short term a positive link between EPL and employment change may emerge, since in recession or stagnation phases it may be easier for firms in countries/regions with low EPL to fire workers in declining sectors. We are also aware of possible problems of direction of causality of the relationship between labour market performance and various institutional and policy settings, particularly active and passive labour market policies (which are partially endogenous variables). However, the structure of the dataset (mix of regional and country level data; see description below), the limited time-span available for many variables and the nature of some indicators (score variables) make it quite difficult to address this problem from the econometric viewpoint (31). Lastly, a fourth group of heterogeneous variables (including, for example, regional population density) is considered. The variables are listed and defined in table A2 of the Appendix.

Using differing equations and econometric methods does allow us to highlight the degree of (in)stability of the value and sign of the parameters of the explicative variables, at least partially. We are also aware that the relative effect of each explicative variable may change over time, and that the existence of "systemic effects" is likely: different quali-quantitative combinations of variables, through complex interactions, may produce additional effects on labour market performance (32). As regards the database, the set of regions examined in the previous section had to be reduced, due to lack of data referring to institutional features, and consists of 187 regions of EU-15 countries (excluding Ireland, Greece and Luxembourg) observed over a seven-year period (1999-2005).

Using institutional variables poses other specific problems. Since they represent peculiar national features, they are obviously available only at country level. However, their impact may differ regionally, according to the structural characteristics of the regional systems in question. Thus, in order to capture the different strength of specific institutions at regional level, their value was weighted, where possible, with a relevant regional indicator. For example, the Employment Protection Legislation Index (EPL 2), levels of bargaining centralisation (CENTR), bargaining coordination (COORD), collective bargaining coverage (COVER) and trade union density (UNION) were weighted for the share of employees out of total employment at regional level. Expenditure in passive labour market policies in the percentage of GDP (PASS_POL) was corrected for the "unemployment/population" ratio at regional level.

Secondly, all country-level institutional variables except trade union density (UNION) (33) were only available for some years/periods. For those indicators available for two years/periods close to 1999 and 2003, the intermediate years and the years 2004 and 2005 were estimated by means of linear interpolation (34). Other variables for which only one year/period was available around the time-span 1999-2003 were assumed to be uniform over the five years (35). On one hand, these features are a limitation to empirical analysis; on the other, they reflect both country specificity (corrected for the regional impact of institutions) and the relative temporal stability of the institutional settings considered.

For cross-section analyses (section 4.4.2), we produced estimations for the first and final years of the considered period by using all explicative variables in two specification models (tables 14 and 15). We also carried out many other bivariate and multivariate estimates, in order to study the determinants of changes in the three dependent variables during the period in question (section 4.4.3; tables 16 and 17).

Lastly, we produced panel econometric estimations (section 4.4.4; tables 18, 19, 20) using four different specifications for each model (ER, UR, LTUR). Before starting panel estimation procedures, we ran a pooled Ordinary Least Square estimate in order to identify the most evident correlations among regressors, to prevent multicollinearity. Variance Inflation Factors (VIFF) suggested excluding DIPEN from the analysis (this variable was used to weight various institutional features). We then performed standard panel data estimates by comparing fixed versus random effects estimates. The significance of the temporal effects indicated that they should be included in the models, whereas the Hausman test unequivocally indicated the use of fixed effects models (see tables 18, 19, 20). This was consistent with previous panel analyses carried out at regional level in this field. For all three (fixed effects) models, the standard diagnostic test showed residual autocorrelation (Wooldridge test), heteroschedasticity (modified Wald test) and contemporaneous correlation (Breusch Pagan LM test). This suggested applying a Prais-Winsten regression correlated panels corrected standard error (PCSEs) estimators. Since the corresponding STATA commands do not automatically provide fixed effects estimates, it was necessary to introduce the 186 (n-1) regional dummy variables (not listed in the tables for the sake of brevity). However, the changes in the significance levels of the estimated coefficients were negligible for the three models.

The presence of the contemporaneous correlation of residuals (two or more units have correlated errors at the same time) indicated the probable existence of unobservable features of some regions, due to unobservable features in other ones. In the case of spatial data, this may reveal the typical phenomenon of spatial autocorrelation, which arises when the value assumed by a variable in a given place is correlated (positively or negatively) with the value assumed by the same variable in a different place or in a set of different places. This may be due essentially to: (a) measurement errors for observations referring to contiguous geographic units; (b) actual spatial interaction patterns. Spatial interaction may be highlighted descriptively (e.g., with the classical Moran I spatial correlation index) or considered in econometric analysis by means of specific techniques (starting from Anselin, 1988). In both cases, the technical precondition to the inclusion of spatial effects is the availability of a weights (or spatial lags) matrix able to express the connections between the geographic units in question. Depending on the nature of the phenomenon, weight may be represented in various ways. In our case, we considered the matrix of the inverse geographical distance between the capital city (or the most highly populated city) of each region.

To assess the necessity of correcting the econometric estimates by means of spatial effects models, we calculated Moran's I spatial autocorrelation index on the three basic labour market performance indicators, using the whole set of 203 regions available (see table 13 and diagram 5) (36).

These results are consistent with the evidence (see, for example, Overmans and Puga, 2002) of employment/unemployment regional clusters in Europe and with the many studies examining regional spatial correlation patterns in labour market indicators (Niebuhr, 2003; Burridge and Gordon, 1981; Mohlo, 1995; Badinger and Url, 2002; Aragon et al., 2003; Blanchard and Katz, 1992; Decressin and FatAs, 1995; Elhorst, 2003, and the many references quoted therein on pp. 738-9). They also show how ER has initially a greater positive spatial correlation with respect to UR and LTUR, which decreases in the last year. Conversely, the trend strongly increases for the unemployment indicators, especially after 2002.

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On these bases, we included spatial effects in the panel econometric estimates. As the econometric literature shows, traditional spatial autoregressive models may present: (a) the dependent variable correlated with its spatial lag (spatial LAG model); the error term affected by spatial autocorrelation (spatial ERROR model); or (C) both spatial LAG and ERROR correlations (37). In the first case, a typical omitted variable problem arises, which cannot be solved by means of OLS estimation (due to simultaneity/endogeneity) and must be tackled using Maximum Likelihood (ML), Instrumental Variables (IV) and Robust approach estimates. Alternative methods of estimation are also recommended in the case of spatial ERROR correlation (Atzeni et al., 2004). In our empirical analysis, we used the MATLAB spatial econometric tools to run ML estimates for fixed effects panel spatial LAG and spatial ERROR models (for results, see third and fourth columns of tables 18,19 and 20, respectively).

4. 4. 2 Results of cross-section analyses

Cross-section analyses produced using the first specification model (38) for the years 1999 and 2005 provided the following main results (table 14): (i) long-term unemployment negatively affects employment rates, with increasing strength in 2005; (ii) the level of economic development (regional per capita GDP) affects ER positively and both UR and LTUR negatively; (iii) higher weekly working hours influence ER negatively, whereas its impact is positive on UR and LTUR, but not always significantly; (iv) higher population density determines lower ER and higher UR and LTUR, at low significance levels; (v) labour cost negatively affects unemployment rates, whereas its sign and significance for LTUR and ER are unstable; (vi) higher ALMP reduce UR and LTUR, whereas the coefficient is not significant for ER; (vii) conversely, passive labour policies increase ER, but also UR and LTUR; (viii) product market regulation increases unemployment rates and has a negative effect on ER; (ix) centralisation of wage bargaining has greatly changing effects on ER and UR, whereas a U-inverted shape relationship emerges for LTUR; (x) the effect of the degree of co-ordination is positive for ER and negative (but not significant) for unemployment rates; (xi) TAX WEDGE is positively related to unemployment rates and negatively to ER in 2005; (xii) EPL, bargaining coverage and union density show not significant and/or very unstable results.

In the 2005 models we also examined the lagged effects of employment protection legislation (by simply including the EPL_2 variable for 2004 and 2003 in the model). These lagged variables show negative (but not significant) coefficients in the "ER" model and positive (but not significant) coefficients in the "UR" and "LTUR"models.

The second specification (table 15) (models with variables EPL_2, CENTR, COORD, COVER and UNION, corrected by share of employees on total employment at regional level) substantially confirms the outcomes obtained with the previous specification, also with regard to the EPL_2 lagged variables (31).

4. 4. 3 Results of determinants of changes in (un)employment rates

We estimated various models in order to examine some determinants of the changes in the three dependent variables in the period 1999-2005.

In the various specifications, we examined the changes in some institutional indicators as explicative variables. In the last two models we also added changes in labour costs.

The main results (statistically significant) of models 1-4, with only one explicative variable, are summarised as follows: (i) the effects of EPL changes are statistically significant only on UR and LTUR, but not in the expected direction; (ii) as regards changes in weekly hours, a surprising inverse relationship arises with changes in LTUR and UR, while not significant impacts on ER change emerge; (iii) growth in the tax wedge unexpectedly affect the dynamics of unemployment negatively (not significant effects on ER).

The following results (statistically significant) arise in models 5 and 6 considering, as explicative variables, changes in the main institutional variables: (i) changes in ALMP have a positive relationship with changes in ER and a negative one with changes in UR and LTUR; (ii) the opposite relationship (with respect to ALMP) occurs for changes in passive labour policies; (iii) changes in the degree of product market regulation have a negative relationship with changes in ER and a positive one with changes in UR and LTUR; (iv) the opposite relationship (with respect to PMRI) occurs for changes in EPL; (v) as regards changes in bargaining indicators (40), growth of centralisation is positively associated with ER growth and negatively with that of UR and LTUR

The introduction of a quadratic term explores the possibility of a U-shaped relationship (in dynamic terms) for the degree of centralisation, which does not emerge as statistically significant (41); last, (vi) changes in union density have an inverse relationship with changes in ER and a positive and significant one with changes in LTUR.

In the last two models (7-8), we consider changes in labour costs in addition to the main institutional variables, with the following results: (i) the signs of the parameters of the institutional variables are not affected by the introduction of the new variable; (ii) changes in labour costs have a negative relationship with ER and a positive relationship with changes in UR, whereas effects on changes in LTUR are not statistically significant. The introduction of quadratic terms for CENTR highlights a possible inverted U-shaped relationship between changes in the degree of centralisation and changes in ER

Lastly, we provide evidence of spatial autocorrelation at the regional level of changes in variable across the 1999-2005 period (table 17) (42). All the changes in variables show positive and 99% statistically significant spatial autocorrelations, except for the employment share of traditional services (GHQ. The level of the coefficient is remarkable for some labour market variables, for which it exceeds 0.5. The higher coefficients of the institutional indicators obviously depend on the fact that they are measured at country level.

4. 4. 4 Results of panel analysis

The four econometric specifications (fixed effects, fixed effects correlated POSE, fixed effects with spatial lags on the dependent variable, fried effects with spatial lags on the error terms) for each dependent variable provide results which are almost identical in terms of coefficient signs, levels and significance. This suggests that the outcomes obtained maybe considered reliable and that the explanatory variables already capture spatial interactions.

Among the economic and structural variables presumed to influence ER (table 18), a negative impact is played by LTUR and population density. The latter suggests that urban regions probably attract labour supply and at the same time are less able to provide those "sub-optimar' employment opportunities usually offered in rural regions (in terms of under-employment in farming and farming-related sectors). Instead, a positive role on

ER is played by relative regional industry specialisation in business X and public (L_Q) services Other industry structure variables (CDF, F, and GHI), as well as per capita GDP levels, have no significant impacts. The number of hours worked weekly (HOURS_corr) is stealy negative, but significant (at 90%) only in spatial eamornetric specifications

Labour cost levels negatively affect employment rate, as expected, while the size of the TAX_WEDGE does not seem to have any statistically significant relationship with ER Conversely, labour policy variables (ACT_POL and PASS_POL) are steadily significant, and positive and negative, respectively.

As regards the set of institutional variables, the product market regulation index TNIRI) plays a persistent negative role, whereas the opposite occurs for EPL The latter relationship also persists with the inclusion in the models of lagged (one or two years) EPL variables Among the remaining institutional variables, only UNION density is steadily significant; and its higher levels are associated with worse ER performance. The remaining institutional variables show mainly insignificant and unstable results".

The second set of estimates (table 19) provides evidence of a negative impact on UR of CDE, GHI, JK and L_Q specialisation. Similarly, HOURS and TAX_WEDGE have a negative and significant coefficient Per capita GDP is never significant at 5% (and only in two models at 10%). Increasing labour costs tend to raise unemployment rates, which are also associated with the most urban contexts (positive sign of DENS). As regards the variables assumed as quantitative proxies of labour policies, ACT_POL is significant only in the spatial models, whereas passive policies are steadily associated with higher UP, Growing product market regulation (PMPJ) also "positively" influences unemployment rates (44).

The third group of estimations (referring to LTUR; table 20) shows some remarkable differences with respect to the previous one. Specialisation in business services is the only significant variable among the industry indicators; GDP and HOURS_corr are not significant; population density decreases long-term unemployment, and stronger ACT_POL are associated with lower LTUR The positive and significant relationships with PMRI and union density are also confirmed for LTUR; EPL is never significant.

5. Summary of main results

In this section we summarise the main results of the compared empirical examination of our three labour market performance indicators, distinguishing two levels, national and regional.

As regards national level (EU-15 countries), we highlight the following main empirical evidence for the period 1997-2006:

(A) notwithstanding a generally low and decreasing annual GDP growth rate (EU-15 average of +2.3% in the whole period and +1.8% over the last five years), a widespread and unexpected improvement in labour market performance occurred (over 18 million new jobs created, all employees, of which over two-thirds with permanent contracts and half with part-time contracts; ER increased in all countries, and by 12.5% on average; UR and LTUR decreased in 12 out of 15 countries, by -24.5% and -35.4% on average, respectively);

(B) correlation coefficients and elasticity between GDP growth and changes in labour market performance indicators are quite unstable over time and across countries, but clearly highlight the fact that the recent slowing down of growth rates was generally accompanied by surprising (un)employment improvements;

(C) in the whole period considered, clear beta convergence emerges for ER, UR and LTUR (in ER terms, this means convergence towards the main quantitative objective of the European Employment Strategy); sigma convergence also occurred in the whole period for ER and started later for UR and LTUR (since 2000 and 2001, respectively), the latter two showing much higher dispersion than the former;

(D) in spite of the above general converging trends, remarkable national differences still existed in 2006 in terms of ER (58.4 of Italy vs. 77.4 of Denmark), UR (9.5 of France vs. 3.9 of Denmark and Netherlands) and LTUR (4.7 of Germany vs. 0.8 of Denmark);

(E) similarly, labour market performance improvements occurred in EU-15 and EMU-12 aggregates;

As for the regional NUTS 2 level, we highlight some results of (i) comparative and convergence analyses and (ii) econometric examination of the determinants of regional labour market performance in the period 1999-2005:

(F) median performance over the period considered is positive for ER but shows a U-shape for unemployment indicators;

(G) transition matrixes highlighted a widespread lower persistence probabilities for UR and LTUR with respect to ER;

(H) lowess beta convergence dynamics emerged for all three indicators; sigma convergence occurred for ER (throughout the period) and for UR and LTUR (since 2001), the latter two showing much higher dispersion than the former.;

(I) in spite of the above prevailing converging dynamics, remarkable regional differences still existed in 2005 in terms of ER (44.1 of Sicily, Italy vs. 78.0 of Berkshire, Bucks and Oxfordshire, UK), UR (22.3 of Halle, Germany vs. 2.6 of Herefordshire, Worcestershire and Warwickshire, UK) and LTUR (13.7 of Dessau, Germany vs. 0.4 of Herefordshire, Worcestershire and Warwickshire, UK);

(L) bivariate regressions confirmed the limited explicative power of the relationship between GDP growth rates and labour market dynamics in the period 19992005;

(M) cross-section analyses (for 1999 and 2005) provided the following main results: (i) long-term unemployment negatively affects employment rates, with increased strength in 2005; (ii) the level of economic development (per capita GDP) affects ER positively and both UR and LTUR negatively; (iii) higher weekly working hours influence ER negatively, whereas its impact is positive on UR and LTUR, but not always significantly; (iv) higher population density determines lower ER and higher UR and LTUR, at low significance levels; (v) labour cost affects unemployment rates negatively, whereas its sign and significance for LTUR and ER are unstable; (vi) higher ALMP reduce UR and LTUR, whereas the coefficient is not significant for ER; (vii) conversely, passive labour policies increase ER, but also UR and LTUR; (viii) product market regulation increases unemployment rates and has a negative effect on ER; (ix) TAX_WEDGE is positively related to unemployment rates and negatively to ER in 2005.

(N) Study of the determinants of ER, UR and LTUR changes (1999-2005) provides interesting results, although they are probably influenced by the short period considered and by cyclical conditions: (i) the effects of EPL changes are statistically significant only on UR and LTUR, but not in the expected direction; (ii) as regards changes in weekly hours, a surprising inverse relationship arises with changes in LTUR and UR, whereas not significant impacts on ER changes emerge; (iii) tax wedge changes inversely affect the dynamics of unemployment. Moreover, the following results (statistically significant) arise in the two models in which changes in the main institutional indicators were used as explicative variables: (i) changes in ALMP have a positive relationship with changes in ER and a negative one with changes in UR and LTUR; (ii) the opposite occurs for changes in passive labour policies; (iii) changes in the degree of product market regulation have a negative relationship with changes in ER and a positive one with changes in UR and LTUR; (iv) the opposite occurs for changes in EPL; (v) changes in union density have an inverse relationship with changes in ER and a positive and significant one with changes in LTUR. In the last two models, considering changes in (hourly) labour cost in addition to the main institutional variables, we obtained the following main results: (i) the signs of the parameters of the institutional variables are not affected by the introduction of the new variable; (ii) changes in labour costs have a negative relationship with ER dynamics and a positive relationship with changes in UR.

(O) The four different econometric approaches used for panel estimates provided almost identical results in terms of coefficient signs, levels and significance, and this suggests that the outcomes obtained may be considered reliable. In particular, the following outcomes were particularly interesting. (i) a higher degree of product market regulation played a clearly negative role on labour market performance indicators; (ii) the effects of EPL were not significant on UR or LTUR, but were positive on ER; (iii) passive labour policies showed a negative effect on ER and a positive relationship with UR and LTUR, highlighting the crucial importance of effective design (eligibility, duration, etc.) in order to avoid undesirable effects; (iv) active labour market policies played an important positive role in improving ER and reducing LTUR; (v) union density showed a significant and negative effect on ER and UR, whereas the relationship was positive with LTUR; (vi) the tax wedge had no significant effects on ER, but revealed an unexpected inverse relationship with UR and LTUR; (vii) labour costs affect ER negatively and UR and LTUR positively; (ix) the number of hours worked weekly (HOURS_corr) is steadily negative with ER (significant at 90% only in the spatial econometric specifications), but it is also negative and significant with UR: (viii) the negative impact on ER determined by LTUR suggests the crucial importance of specific active policies aimed at reducing permanent labour exclusion and hysteresis phenomena; (ix) population density had a negative significant effect on ER and LTUR, but a positive one on UR; one explanation is that urban regions attract more labour supply, but are less able to provide those "sub-optimal" employment opportunities usually offered in rural areas, whereas permanent exclusion from employment is less probable; (x) a positive role on ER is played by relative regional industry specialisation in business UK) and public (L_Q) services, whereas a negative and significant impact on UR and LTUR of specialisation in the industry sector (CDE), traditional services (GHI), business (JK) and public (L_Q) services (the latter not significant for LTUR) emerged. Obviously, a higher share of employment in public services was related to higher ER and lower UR, mainly due to the particular characteristics and regional polarisation of this sector; (xi) lastly, it is particularly interesting that regional per capita GDP is never significant in explaining ER and LTUR, while a limited significance (with negative sign) occurred in only two UR models.

6. Policy implications and further research

Lastly, this section presents some policy implications deriving from the above evidence and results, and suggests some directions for further research.

Study of the reasons for the (unexpected) improvement in labour market performance in EU-15 countries was beyond the scope of this paper. However, we can exclude (i) a "growth-led" effect (45), (ii) a "macro-economic (fiscal) policy effect" (46) and (iii) a "single-currency effect" (47). Instead, the direct and indirect effects of the European Employment Strategy (launched in 1997) on national (and regional) employment improvements, which are extremely difficult to assess, cannot easily be excluded. These hypothetical positive effects had already been emphasised in a previous research (Perugini and Signorelli, 2004) and are reinforced by the present update of analysis. The EES produced some direct effects through the European Social Fund, but we argue that it may, especially, have produced indirect effects with its suggestions (guidelines) for structural labour market reforms and policy interventions addressed to national (and regional) governments (48). In particular, these labour reforms and policies probably favoured a partial emersion of "irregular employment", especially in countries with a higher weight of shadow economy (49).

As for the regional level of investigation, in general terms the econometric analyses emphasise some difficulties in obtaining clearcut, stable results on the determinants of regional labour market differentials and dynamics, according to: (i) the specification model and estimate technique adopted, and (ii) the employment or unemployment indicator used. Obviously, the main characteristics of the causal links arising from these empirical analyses (sign and intensity, but especially the "robustness" of the results) also contribute to defining the degree of uncertainty about the probable impact of various economic policies and institutional reforms, which is one of the crucial factors to be considered (ex-ante) by policy-makers. Therefore, we argue that our approach may favour the initial selection and ranking of the most important variables which (partly) explain the differences and dynamics in regional (un)employment indicators. In particular, moving from the evidence that development/growth variables cannot significantly contribute towards explaining the huge differences and recent dynamics in regional labour market performance, and considering the unclear effects of sector specialisation (with some exceptions), the role of a few institutional factors (especially product market regulation (50) and active labour market policies (51) and labour costs emerged, with clear and quite stable effects on performance indicators. This evidence especially addresses: (i) wider diffusion of ALMP best practices and more effective implementation of passive policies; (ii) the definition of structural policies aimed at reducing the degree of product market regulation. In addition, many results highlight an inverse relationship between labour costs and labour market performance, suggesting the importance of industrial relations systems favouring "wage moderation" (52).

Although positive net job creation is one of the key instruments favouring social inclusion (53), it is necessary to recall that this paper aimed at examining labour market performance differentials and dynamics in quantitative and stack terms (54). Further analyses of (i) both quantitative and qualitative performance indicators (i.e., more and better jobs, but also higher productivity and wages, etc.) and (ii) using a stock-flow approach (i.e., also considering flows "in and out" of the different statuses of persons employed, unemployed, out of the labour force, employed in temporary contracts, permanently employed, etc.) would be very useful. On the first point, Marelli's paper (in this issue) emphasises how one key challenge for EU countries and regions is the spread of "virtuous models" of growth, characterised by significant increases in employment and even larger productivity gains (55). This would be the best "landing" after a long period (from 1970s to the mid-1990s) of prevailing "intensive models" of growth in EU-15 (with significant productivity gains and low or negative net job creation), recently followed by the spread of "extensive models" of growth (with significant improvements in employment, but generally low GDP and productivity growth rates) (56). On the second point, Boeri and Garibaldi (2007) highlight a "transitional honeymoon effect" on net job creation produced by labour market reforms increasing flexibility "at the margin", but it would be useful: (i) to explain why, in some countries, the honeymoon is lasting so long, and (ii) to better define the conditions for improving further the "bridge function towards permanent jobs" played by temporary and training contracts.

Lastly, at least the following two further research developments of this paper are of particular interests (57): (i) examination of possible interactions between various institutional variables, in order to detect "systemic effects" and possible situations of "institutional equivalence", i.e., different institutional "baskets" allowing similar high degrees of performance; (ii) joint and integrated analysis of the determinants of both national and regional labour market performance differentials and dynamics.

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Appendix

Table A1. Female Em.lo ent rate R levels and dynamics
EES objective: more than 60% b 2010)

                  1997    1998    1999

EU-15             50.8    51.6    53.0
EMU-12            47.7    48.6    50.1
Belgium           46.5    47.6    50.4
Denmark           69.1    70.2    71.1
German            55.3    55.8    57.4
Ireland           45.9    49.0    52.0
Greece            39.3    40.5    41.0
Spain             34.6    35.8    38.5
France            52.4    53.1    54.0
Italy             36.4    37.3    38.3
Luxembourg        45.3    46.2    48.6
Netherlands       58.0    60.1    62.3
Austria           58.6    58.8    59.6
Portugal          56.5    58.2    59.4
Finland           60.3    61.2    63.4
Sweden            67.2    67.9    69.4
U. K.             63.1    63.6    64.2
Coeff. of var.   0.206   0.199   0.190
U. S.             67.1    67.4    67.6
Japan             57.6    57.2    56.7

                  2000    2001    2002

EU-15             54.1    55.0    55.6
EMU-12            51.4    52.4    53.1
Belgium           51.5    51.0    51.4
Denmark           71.6    72.0    71.7
German            58.1    58.7    58.9
Ireland           53.9    54.9    55.4
Greece            41.7    41.5    42.9
Spain             41.3    43.1    44.4
France            55.2    56.0    56.7
Italy             39.6    41.1    42.0
Luxembourg        50.1    50.9    51.6
Netherlands       63.5    65.2    66.2
Austria           59.6    60.7    61.3
Portugal          60.5    61.3    61.4
Finland           64.2    65.4    66.2
Sweden            70.9    72.3    72.2
U. K.             64.7    65.0    65.2
Coeff. of var.   0.180   0.178   0.170
U. S.             67.8    67.1    66.1
Japan             56.7    57.0    56.5

                  2003    2004    2005    2006

EU-15             56.0    56.8    57.4    58.4
EMU-12            53.6    54.5    55.2    56.4
Belgium           51.8    52.6    53.8    54.0
Denmark           70.5    71.6    71.9    73.4
German            58.9    59.2    59.6    61.5
Ireland           55.7    56.5    58.3    59.3
Greece            44.3    45.2    46.1    47.4
Spain             46.3    48.3    51.2    53.2
France            57.3    57.4    57.6    57.7
Italy             42.7    45.2    45.3    46.3
Luxembourg        50.9    51.9    53.7    54.6
Netherlands       66.0    65.8    66.4    67.7
Austria           61.6    60.7    62.0    63.5
Portugal          61.4    61.7    61.7    62.0
Finland           65.7    65.6    66.5    67.3
Sweden            71.5    70.5    70.4    70.7
U. K.             65.3    65.6    65.9    65.8
Coeff. of var.   0.159   0.146   0.138   0.135
U. S.             65.7    65.4    65.6    n.a.
Japan             56.8    57.4    58.1    n.a.

                 [DELTA] 1997-2006 (1)
                 p.p.    %

EU-15             $7.6   $15.00
EMU-12            $8.7   $18.20
Belgium           $7.5   $16.10
Denmark           $4.3    $6.20
German            $6.2   $11.20
Ireland          $13.4   $29.20
Greece            $8.1   $20.60
Spain            $18.6   $53.80
France            $5.3   $10.10
Italy             $9.9   $27.20
Luxembourg        $9.3   $20.50
Netherlands       $9.7   $16.70
Austria           $4.9    $8.40
Portugal          $5.5    $9.70
Finland           $7.0   $11.60
Sweden            $3.5    $5.20
U. K.             $2.7    $4.30
Coeff. of var.
U. S.             -1.5
Japan             $0.5     +0.9

Source: Eurostat

Note: (1) [DELTA] 1997-2005 for U.S. and Japan.

Table A2. 55-64 Employment rate (ER) levels and dynamics
(EES objective: more than 50% by 2010)

                  1997    1998    1999

EU-15             36.4    36.6    37.1
EMU-12            33.5    33.5    33.9
Belgium           22.1    22.9    24.6
Denmark           51.7    52.0    54.5
German            38.1    37.7    37.8
Ireland           40.4    41.7    43.7
Greece            41.0    39.0    39.3
Spain             34.1    35.1    35.0
France            29.0    28.3    28.8
Italy             27.9    27.7    27.6
Luxembourg        23.9    25.1    26.4
Netherlands       32.0    33.9    36.4
Austria           28.3    28.4    29.7
Portugal          48.5    49.6    50.1
Finland           35.6    36.2    39.0
Sweden            62.6    63.0    63.9
U. K.             48.3    49.0    49.6
Coeff. of var.   0.302   0.299   0.292
U.S.              57.2    57.7    57.7
Japes             64.2    63.8    63.4

                  2000    2001    2002

EU-15             37.8    38.8    40.2
EMU-12            34.4    35.2    36.5
Belgium           26.3    25.1    26.6
Denmark           55.7    58.0    57.9
German            37.6    37.9    38.9
Ireland           45.3    46.8    48.0
Greece            39.0    38.2    39.2
Spain             37.0    39.2    39.6
France            29.9    31.9    34.7
Italy             27.7    28.0    28.9
Luxembourg        26.7    25.6    28.1
Netherlands       38.2    39.6    42.3
Austria           28.8    28.9    29.1
Portugal          50.7    50.2    51.4
Finland           41.6    45.7    47.8
Sweden            64.9    66.7    68.0
U. K.             50.7    52.2    53.4
Coeff. of var.   0.290   0.301   0.287
U.S.              57.8    58.6    59.5
Japes             62.8    62.0    61.6

                  2003    2004    2005    2006

EU-15             41.7    42.5    44.1    45.3
EMU-12            37.9    38.6    40.4    41.7
Belgium           28.1    30.0    31.8    32.0
Denmark           60.2    60.3    59.5    60.7
German            39.9    41.8    45.4    48.4
Ireland           49.0    49.5    51.6    53.1
Greece            41.3    39.4    41.6    42.3
Spain             40.7    41.3    43.1    44.1
France            36.8    37.3    37.9    37.6
Italy             30.3    30.5    31.4    32.5
Luxembourg        30.3    30.4    31.7    33.2
Netherlands       44.3    45.2    46.1    47.7
Austria           30.3    28.8    31.8    35.5
Portugal          51.6    50.3    50.5    50.1
Finland           49.6    50.9    52.7    54.5
Sweden            68.6    69.1    69.4    69.6
U. K.             55.4    56.2    56.9    57.4
Coeff. of var.   0.274   0.274   0.253   0.243
U.S.              59.9    59.9    60.8    n.a.
Japes             62.1    63.0    63.9    n.a.

                 [DELTA] 1997-2006 (1)
                 p.p.    %

EU-15             $8.9   $24.50
EMU-12            $8.2   $24.50
Belgium           $9.9   $44.80
Denmark           $9.0   $17.40
German           $10.3   $27.00
Ireland          $12.7   $31.40
Greece           $1.30    $3.20
Spain            $10.0   $29.30
France            $8.6   $29.70
Italy             $4.6   $16.50
Luxembourg        $9.3   $38.90
Netherlands      $15.7   $49.10
Austria           $7.2   $25.40
Portugal          $1.6    $3.30
Finland          $18.9   $53.10
Sweden            $7.0   $11.20
U. K.             $9.1   $18.80
Coeff. of var.
U.S.              $3.6    $6.30
Japes             -0.3     -0.5

Source: rurostat

Note: (1) A 1997-2005 for U.S. and Japan.

Table A3. NUTS 2 reiaions considered in empirical analysis

BELGIUM

be10   Brussels
be21   Prov. Antwerpen
be22   Prov. Limburg (B)
be23   Prov. Oost-Vlaanderen
be24   Prov. Vlaams Brabant
be25   Prov. West-Vlaanderen
be31   Prov. Brabant Wallon
be32   Prov. Hainaut
be33   Prov. Liege
be34   Prov. Luxembourg (B)
be35   Prov. Namur

SPAIN

es11   Galicia
es12   Principado de Asturias
es13   Cantabria
es21   Pais Vasco
es22   Com. Foral de Navarra
es23   La Rioja
es24   Aragon
es30   Comunidad de Madrid
es41   Castilla y Leon
es42   Castilla-la Mancha
es43   Extremadura
es51   Cataluna
es52   Comunidad Valenciana
es53   Illes Balears
es61   Andalucia
es62   Region de Murcia

FRANCE

fr10    Ile de France
fr21    Champagne-Ardenne
fr22    Picardie
fr23    Haute-Normandie
fr24    Centre
fr25    Basse-Normandie
fr26    Bourgogne
fr30    Nord--Pas-de-Calais
fr41    Lorraine
fr42    Alsace
fr43    Franche-Comte
fr51    Pays de la Loire
fr52    Bretagne
fr53    Poitou-Charentes
fr61    Aquitaine
fr62    Midi-Pyrenees
fr63    Limousin
fr71    Rhone-Alpes
fr72    Auvergne
fr81    Languedoc-Roussillon
fr82    Prov.-Alpes-Cote d'Azur
fr83    Corse

PORTUGAL

pt11    Norte
pt15    Algarve
pt16    Centro (PT)
pt17    Lisboa
pt18    Alentejo

ITALY

itc1    Piemonte
itc2    Valle d'Aosta
itc3    Liguria
itc4    Lombardia
itd1    Pr. Aut. Bolzano
itd2    Prov. Aut. Trento
itd3    Veneto
itd4    Friuli-Venezia Giulia
itd5    Emilia-Romagna
ite1    Toscana
ite2    Umbria
ite3    Marche
ite4    Lazio
itf1    Abruzzo
itf2    Molise
itf3    Campania
itf4    Puglia
itf5    Basilicata
itf6    Calabria
itg1    Sicilia
itg2    Sardegna

LUXEMBOURG *

lu00    Luxembourg

SWEDEN

se01    Stockholm
se02    Ostra Mellansverige
se04    Sydsverige
se06    Norm Mellansverige
se07    Mellersta Norrland
se08    Ovre Norrland
se09    Smaland med oarna
se0a    Vastsverige

GREECE *

gr11    Anat. Maked. Thraki
gr12    Kentriki Makedonia
gr13    Dytiki Makedonia
gr14    Thessalia
gr21    Ipeiros
gr22    Ionia Nisia
gr23    Dytiki Ellada
gr24    Sterea Ellada
gr25    Peloponnisos
gr30    Attiki
gr41    Voreio Aigaio
gr42    Notio Aigaio
gr43    Kriti

DENMARK

dk00    Denmark

IRELAND *

ie01    Border, Midl. West.
ie02    South. and Eastern

AUSTRIA

at11    Burgenland
at12    Niederosterreich
at13    Wien
at21    Karnten
at22    Steiermark
at31    Oberosterreich
at32    Salzburg
at33    Tirol
at34    Vorarlberg

FINLAND

fi13    Ita-Suomi
fi18    Etela-Suomi
fi19    Lansi-Suomi
fi1a    Pohjois-Suomi

NETHERLANDS

nl11    Groningen
nl12    Friesland
nl13    Drenthe
nl21    Overijssel
nl22    Gelderland
nl23    Flevoland
nl31    Utrecht
nl32    Noord-Holland
nl33    Zuid-Holland
nl34    Zeeland
nl41    Noord-Brabant
nl42    Limburg (NL)

GERMANY

de11    Stuttgart
de12    Karlsruhe
de13    Freiburg
de14    Tubingen
de21    Oberbayern
de22    Niederbayern
de23    Oberpfalz
de24    Oberfranken
de25    Mittelfranken
de26    Unterfranken
de27    Schwaben
de30    Berlin
de41    Brand.--Nordost
de42    Brand.--Sudwest
de50    Bremen
de60    Hamburg
de71    Darmstadt
de72    Giessen
de73    Kassel
de80    Mecklenburg-Vorp.
de91    Braunschweig
de92    Hannover
de93    Luneburg
de94    Weser-Ems
dea1    Dusseldorf
dea2    Koln
dea3    Munster
dea4    Detmold
dea5    Arnsberg
deb1    Koblenz
deb2    Trier
deb3    Rheinhessen-Pfalz
dec0    Saarland
ded1    Chemnitz
ded2    Dresden
ded3    Leipzig
dee1    Dessau
dee2    Halle
dee3    Magdeburg
def0    Schleswig-Holstein
deg0    Thuringen

UNITED KINGDOM

ukc1    Tees Valley and Durham
ukc2    Northumberland, Tyne and Wear
ukd1    Cumbria
ukd2    Cheshire
ukd3    Greater Manchester
ukd4    Lancashire
ukd5    Merseyside
uke1    East Riding and North Lincolns.
uke2    North Yorkshire
uke3    South Yorkshire
uke4    West Yorkshire
ukf1    Derbyshire and Nottinghamshire
ukf2    Leic., Rutland and Northants
ukf3    Lincolnshire
ukg1    Hereford., Worc. and Warks
ukg2    Shropshire and Staffordshire
ukg3    West Midlands
ukh1    East Anglia
ukh2    Bedfordshire, Hertfordshire
ukh3    Essex
uki1    Inner London
uki2    Outer London
ukj1    Berkshire, Bucks and Oxfordshire
ukj2    Surrey, East and West Sussex
ukj3    Hampshire and Isle of Wight
ukj4    Kent
ukk1    Glouc, Wilt. and North Somerset
ukk2    Dorset and Somerset
ukk3    Cornwall and Isles of Scilly
ukk4    Devon
ukl1    West Wales and The Valleys
ukl2    East Wales
ukm1    North Eastern Scotland
ukm2    Eastern Scotland
ukm3    South Western Scotland
ukm4    Highlands and Islands
ukn0    Northern Ireland

* The regions of these countries were excluded
in the analysis of section 4.3 and 4.4

Table A4. Variables used in descriptive and econometric analysis

Variable                Description

ER                      Employment rate (Employed /
                        population aged 15-64)
UR                      Unemployment Rate (Unemployed / Labour Force)

LTUR                    Long Term Unemployment Rate (Long-term
                        unemployed - 12 months and more/Labour Force)

CDE                     % of total employment in Industry sector
                        (excluding construction

F                       % of total employment in Construction sector

GHI                     % of total employment in traditional services
                        (Wholesale and retail trade, repair of
                        motor vehicles, motorcycles, and personal
                        and household goods; hotels and restaurants;
                        transport, storage and communication

JK                      % of total employment in Financial
                        intermediation; real estate,
                        rentin and business activities

L_Q                     % of total employment in Public
                        administration and defence,
                        compulsory social security,
                        education; health and social work;
                        other community, social and personal
                        service activities; private
                        households with employed persons;
                        extra-territorial
                        organisations and bodies

GDP                     Per capita Gross Domestic Product in
                        Purchasing Power Parity

PART_TIME               Share of part-time workers on total employment

HOURS_corr[alpha]       Average number of usual weekly hours of
                        work in main job
                        full-time).

DIPEN                   Share of employees on total employment

DENS                    Population density

LAB_COST [beta]         Hourly labour costs, Industry and
                        services (excluding public
                        administration), Purchasing Power Parity

TAX_WEDGE [beta]        Tax wedge on labour cost: relative
                        tax burden for an employed
                        person with low earnings

ACT_POL [beta]          Expenditure in Active Labour
                        Market Policies (ALMP)
                        (categories 2-7) in % of GDP

PASS_POL corr [gamma]   Expenditure in Passive
                        Labour Market Policies (PLMP)
                        (categories 8-9) in % of GDP

PMRI [beta]             Product Market Regulation
                        Index (0-6, from last to most
                        restrictive

EPL_2 [beta]            Overall Employment Protection
                        Legislation Index (Version 2)
EPL_2_corr [delta]

CENTR [beta]            Level of Bargaining
                        Centralisation (range: 1-5)
CENTR_corr [delta]

COORD [beta]            Level of Bargaining
                        Coordination (range: 1-5)
COORD_corr [delta]

COVER [beta]            Collective Bargaining Coverage
COVER_corr [delta]

UNION [beta]            Trade Union Density
UNION corr [delta]

Variable                Source

ER                      Eurostat Regio

UR                      Eurostat Regio

LTUR                    Eurostat Regio

CDE                     Eurostat Regio

F                       Eurostat Regio

GHI                     Eurostat Regio

JK                      Eurostat Regio

L_Q                     Eurostat Regio

GDP                     Eurostat Regio

PART_TIME               Eurostat Regio

HOURS_corr[alpha]       Eurostat Regio

DIPEN                   Eurostat Regio

DENS                    Eurostat Regio

LAB_COST [beta]         Eurostat

TAX_WEDGE [beta]        Eurostat

ACT_POL [beta]          Eurostat

PASS_POL corr [gamma]   Eurostat

PMRI [beta]             Oecd, Economic and
                        Policy Reforms: going for
                        growth 2005b

EPL_2 [beta]            Oecd Employment
EPL_2_corr [delta]      Outlook 2004

CENTR [beta]            Oecd Employment
CENTR_corr [delta]      Outlook 2004

COORD [beta]            Oecd Employment
COORD_corr [delta]      Outlook 2004

COVER [beta]            Oecd Employment
COVER_corr [delta]      Outlook 2004

UNION [beta]            Oecd on line database
UNION corr [delta]

[alpha] Variable at regional level weighted for the
regional share of full time workers on total employr

[beta] Variable at national level assumed uniform for
all corresponding regions

[gamma] Variable at national level weighted for
unemployment/population ratio at regional level

[delta] Variable at national level weighted for
the regional share of employees on total employment


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(29) Therefore, in this paper, we do not (econometrically) analyse the determinants of national labour market performance differential and dynamics. This topic is well-known to have been extensively analysed (both theoretically and empirically) in the economic literature.

(30) For a check-list of the variables used in studying regional unemployment rate differentials, see Elhorst (2003). This author also provides a very useful review of the most important empirical and theoretical literature on regional UR differences.

(31) Refinement of this point is one important aim of future research.

(32) Some researches define and highlight the possible "institutional equivalence" of various institutional systems (e.g., Bruno and Garofalo, 1999). In particular, it is possible that various "sets of institutional factors", interacting with other variables, have similar effects on (un)employment performance. In addition, we cannot exclude the fact that similar "sets of institutional variables" have significantly different effects on labour market performance (Signorelli, 2000).

(33) This variable is available online at the OECD database for the years 1999 to 2001 (or 2002 for few countries). The remaining years were estimated by linear interpolation.

(34) This is the case for EPL 2, which has two available values for the late 1990s and 2003, respectively; for PMRI, available for 1998 and 2003.

(35) These are: collective bargaining coverage (COVER), available for 2000; and bargaining centralisation (CENTR) and (COORD), available for the period 1995-2000.

(36) The outcomes do not change if the Moran Index is calculated on the 187 regions used for panel regressions.

(37) in formal terms, following Atzeni et al. (2004), if W is the weight matrix, the starting point is: y = [rho]W1y + X[beta]+[epsilon] and [epsilon] = [lambda]W2 [epsilon] + [eta],

with

[eta]--N (0, O), and the diagonal elements of the O covariance matrix of errors Oij=hi(z[alpha]);

[beta] is a vector Kx1 of parameters associated with explicative variables X (matrix N x K);

[rho] is the coefficient of the spatially lagged dependent variable;

[gamma] is the coefficient of a spatial autoregressive structure for disturbance e.

We obtain a spatial LAG model if [lambda] = [alpha] = 0 and y = [rho]W1y + X[beta]+[epsilon].

We obtain a spatial ERROR model if [rho] = [alpha] = 0 and y = X [beta] + [(I - [lambda] W).sup.-1][eta].

(38) In the first model, variables EPL_2, CENTR, COORD, COVER and UNION are not corrected by the share of employees at regional level.

(39) In order to asses the possible existence of complementarity effects between labour and product markets regulation levels, in other estimations (not reported here, but available upon request) we also considered, in addition to EPL_2 and PMRI, also their interaction. The interaction variables reveal greatly changing results in different years, and their inclusion does not change the sign or significance of the coefficients of the other variables. However, in-depth analysis of complementarity of institutional settings may be one future development of the present research.

(40) As explained in the data description, their level (not corrected by the share of dependent employment) does not change during the period considered, so that the dynamics of the corrected variables are only due to changes in share of employees. Of course, this variation is the same for the three variables, so that (in terms of variations) they are perfectly collinear, and the sign of the surviving one also applies to the remaining ones.

(41) In order to asses the impact of these (time-unchanging, except for the weight component) variables on the estimated models, we also run regressions 5 to 8 excluding them (available upon request). This did not change the signs and significance of the remaining variables.

(42) Of course, the institutional (not corrected) variables which do not vary in the period (CENTR, COORD and COVER) are not included, since their changes are always zero.

(43) For this and the following models, we also ran estimates (available upon request) excluding the time-invariant indications (except for the eight component), but the sign and significance of the remaining variables did not change.

(44) If employment protection legislation (also in lagged form) and bargaining coordination levels are not significant, an increasing bargaining centralisation (associated with its quadratic form) reduces UP, with decreasing marginal effects (the significance of the U-shaped pattern reveals that a positive relationship emerges only after very high levels of centralisation. Lastly, the degree of bargaining coverage (COVER) is associated with higher UR (significant in the spatial models), whereas union density coefficient does not play a clear and statistically significant role.

(45) In addition to the evidence of low and declining GDP growth, the econometric results clearly excluded this effect.

(46) As is well-known, generally restrictive macro-economic policies were required of many EU-15 countries, in order to achieve the financial convergence goals defined by the Maastricht Treaty criteria (1992) in view of EMU membership, and (partly) confirmed in the recently reformed (2005) "Stability and Growth Pact" signed in 1997.

(47) The Optimal Currency Area theories mainly focus on the necessity to have a high degree of (geographical) labour mobility in order to avoid undesirable labour market performance effects. Considering the well-known low labour mobility in European countries and regions (with respect to the US), it should be recalled that this was one of the main reasons against the establishment of a monetary union in Europe; but the announced dramatic employment effects never happened, notwithstanding the prevailing real exchange rate appreciation of the Euro. However, we stress that complex migration phenomena was not considered in this paper and, obviously, they are (partly) different across EU-15 regions and countries, and change over time, with various effects on labour market performance and dynamics.

(48) The EES is well-known as a "dynamic" open method of co-ordination of European (national and regional) employment policies, based on guidelines periodically addressed to member states according to their specific labour market performance dynamics and institutional characteristics and changes. According to the European Employment Guidelines, each country annually presents a National Reform Programme and an Employment Report focusing on implemented policies and on labour market performance changes. We recall here only three features of the EES: (i) it devotes attention to the process of exchange of information between member states, allowing better assessment of the transferability of good practices, (ii) it attributes a key role to active labour market policies and (iii) since 2000, it has provided a better definition of clearer quantitative ER objectives, with greater emphasis on net employment creation rather than unemployment reduction and, in addition, it has been integrated in the more general "Lisbon Strategy" (launched in 2000 and reformed in 2005). In 2005 the European Commission decided that the Employment Guidelines and the Broad Economic Policy Guidelines should be fully reviewed only every three years. Recently, in its "Green Paper" and Communication (November 22, 2006 and June 27, 2007, respectively) the European Commission (i) launched a broad open public debate for favouring a better definition of the so-called "flexicurity" approach and (ii) proposed the establishment of common principles of flexicurity to promote more and better jobs by combining flexibility and security for workers and companies.

(49) If this is the case, the stagnation of labour productivity may be partly explained by the fact that "emerged" employment has, at least initially, a productivity level below the average of regular employment.

(50) The degree of product market regulation is defined by considering (i) state control of business enterprises, (ii) legal and administrative barriers to entrepreneurship and (iii) barriers to international trade and investment.

(51) The set of active labour market policies is quite large and include the support to (i) private and public job matching services, (ii) training programmes (personalised for unemployed and/or addressed to specific groups of disadvantaged people).

(52) It is not simple to properly define "wage moderation", but it depends crucially on a better link between wages (labour costs) and productivity--both levels and dynamics--across regions, firms and workers, and over time.

(53) Higher ER (and lower UR and LTUR) favours socially sustainable economic development. We recall the important effect (through the "fiscal wedge") of a higher ER for the dynamic sustainability of the European "welfare state systems".

(54) In other words, the aim of the paper is to shed light on the evidence of countries and especially regions with comparatively more and/or increasing jobs (opportunities) and less and/or decreasing (long-term) unemployment.

(55) Productivity gains may allow sustainable increases in real wages which, affecting consumers' expenditure, can further reinforce "virtuous models".

(56) Whereas the European Employment Strategy may be "suspected" of positive direct and indirect effects on (national and regional) labour market performance dynamics, the Lisbon Strategy was certainly not followed by the declared gains in compared competitiveness and growth, mainly as a consequence of very limited implementation (see, e.g., Perugini and Signorelli, 2005b). The European Commission and European Central Bank recommendations mainly focus on levels and dynamics of national public finance balances (deficit and debt with respect to GDP), whereas attention paid to the levels and compositions of the EU budget (around 1% of EU GDP, with a still high--over 40%--weight of expenditure for the agricultural sector) and national budgets (with a public expenditure of around 50% of the GDP and a marginal weight of public investments) is generally insufficient. We argue that significant modifications to the compositions of national (and sub-national) budgets, together with a gradual reduction of their levels with respect to GDP, are of crucial importance in favouring the spread of "virtuous models" of growth and may be partly favoured by better implementation of the reformed "Stability and Growth Pact". As for the EU budget, an increase of incidence with respect to GDP would be desirable but not realistic in the short-medium term, whereas there are still significant margins for further improvements in the effective allocation of EU resources. However, the declared key objective of "more growth and jobs for all EU regions and cities" adopted for the new Structural Funds (2007-2013) is consistent with the European "Growth and Jobs Agenda" launched in 2005. Obviously, it is absolutely necessary to avoid the EU falling headlong into the worst of the possible "models of growth" characterised by low or negative dynamics in both employment and productivity (and GDP). Many theoretical and empirical researches clearly attributed to the quantity and/or quality of (public and private) investment in human capital (basic and academic education, on the job training, life-long learning, etc.) a key role for favouring better GDP growth rates and higher productivity gains.

(57) Obviously a key condition for favouring the above and other empirical research development at sub-national levels is related to the availability of new economic, structural and institutional data (e.g. institutional data at NUTS 2 level and sectoral--NACE two-digits classification--GDP

and employment data at NUTS 3 level).

Cristiano Perugini and Marcello Signorelli Department of Economics, Finance and Statistics--University of Perugia
Table 1. Employment rate (ER) levels and dynamics

                 1997    1998    1999    2000    2001    2002    2003

EU-15            60.7    61.4    62.5    63.4    64.0    64.2    64.3
EMU-12           58.4    59.2    60.4    61.5    62.2    62.4    62.6
Belgium          56.8    57.4    59.3    60.5    59.9    59.9    59.6
Denmark          74.9    75.1    76.0    76.3    76.2    75.9    75.1
Germany          63.7    63.9    65.2    65.6    65.8    65.4    65.0
Ireland          57.6    60.6    63.3    65.2    65.8    65.5    65.5
Greece           55.1    56.0    55.9    56.5    56.3    57.5    58.7
Spain            49.5    51.3    53.8    56.3    57.8    58.5    59.8
France           59.6    60.2    60.9    62.1    62.8    63.0    63.3
Italy            51.3    51.9    52.7    53.7    54.8    55.5    56.1
Luxembourg       59.9    60.5    61.7    62.7    63.1    63.4    62.2
Netherlands      68.5    70.2    71.7    72.9    74.1    74.4    73.6
Austria          67.8    67.9    68.6    68.5    68.5    68.7    68.9
Portugal         65.7    66.8    67.4    68.4    69.0    68.8    68.1
Finland          63.3    64.6    66.4    67.2    68.1    68.1    67.7
Sweden           69.5    70.3    71.7    73.0    74.0    73.6    72.9
U. K.            69.9    70.5    71.0    71.2    71.4    71.3    71.5
Coeff. of var.   0.118   0.113   0.109   0.103   0.101   0.096   0.090
U. S.            73.5    73.8    73.9    74.1    73.1    71.9    71.2
Japan            70.0    69.5    68.9    68.9    68.8    68.2    68.4

                                            [DELTA]
                 2004    2005    2006    1997-2006 (1)

                                         p. p.     %

EU-15            64.7    65.2    66.0     +5.3    +8,7
EMU-12           63.0    63.5    64.5     +6.1   +10,4
Belgium          60.3    61.1    61.0     +4.2    +7,4
Denmark          75.7    75.9    77.4     +2.5    +3,3
Germany          65.0    65.4    67.2     +3.5    +5,5
Ireland          66.3    67.6    68.6    +11.0   +19,1
Greece           59.4    60.1    61.0     +5.9   +10,7
Spain            61.1    63.3    64.8    +15.3   +30,9
France           63.1    63.1    63.0     +3.4    +5,7
Italy            57.6    57.6    58.4     +7.1   +13,8
Luxembourg       62.5    63.6    63.6     +3.7    +6,2
Netherlands      73.1    73.2    74.3     +5.8    +8,5
Austria          67.8    68.6    70.2     +2.4    +3,5
Portugal         67.8    67.5    67.9     +2.2    +3,3
Finland          67.6    68.4    69.3     +6.0    +9,5
Sweden           72.1    72.5    73.1     +3.6    +5,2
U. K.            71.6    71.7    71.5     +1.6    +2,3
Coeff. of var.   0.082   0.079   0.081
U. S.            71.2    71.5    n.a.     -2.0    -2.7%
Japan            68.7    69.3    n.a.     -0.7    -1.0%

Note: (1) [DELTA] 1997-2005 for US and Japan. Source: Eurostat
(online database).

Table 2. 15-64 Employment and population changes (1997-2006; absolute
value and %)

                [DELTA]     % [DELTA]     [DELTA]
               1997-2006    1997-2006    1997-2006
               Employment   Employment   Population

EU-15         +18,704,500     +12,5      +9,165,500
EMU-12        +16,858,300     +14,4      +7,769,100
Belgium          +425,700     +11,2        +238,500
Denmark          +129,100      +4,9         +58,100
Germany         +1629,900      +4,7       -411,000
Ireland (3)      +624,600     +45,5        +535,600
Greece           +611,800     +16,3        +366,300
Spain          +6,349,000     +47,9      +3,478,800
France         +2,674,400     +12,2      +2,385,100
Italy          +2,781,400     +14,0         +30,900
Luxembourg        +26,900     +16,0         +26,600
Netherlands      +904,000     +12,5        +411,900
Austria          +270,100      +7,5        +212,000
Portugal         +303,800      +6,7        +410,200
Finland          +256,400     +11,9         +84,100
Sweden           +421,600     +10,7        +303,400
U. K.          +1,295,700      +4,9      +1,035,000

              [DELTA] 1997-2006 Employees      [DELTA]
                                              1997-2006
               Total (1)    Temporary (1)   Part time (2)

EU-15         +18,527,200     +5,787,200      +9,133,000
EMU-12        +16,732,100     +5,853,100      +8,528,500
Belgium          +441,600       +115,100        +370,500
Denmark          +118,300        -43,600         +48,800
Germany         +1295,400     +1,079,600      +3,308,900
Ireland (3)      +608,500        -44,800         -85,900
Greece           +718,600        +72,500         +79,700
Spain          +6,069,400     +2,118,000      +1,255,000
France         +2,848,900       +454,100        +571,300
Italy          +2,560,900     +1,080,200      +1,587,100
Luxembourg        +26,700         +7,600         +19,700
Netherlands      +882,800       +458,700      +1,050,900
Austria          +285,600        +64,700        +305,700
Portugal         +663,600       +407,100         +51,400
Finland          +330,000        +40,200         +93,100
Sweden           +476,900       +260,200        +125,300
U. K.          +1,199,900       -282,600        +430,300

Note: (1) Total and Temporary contracts for employees may be par- time
or full-time; (2) part-time employment may be (i) permanent or
temporary contracts for employees and (ii) self-employment; (3) Ireland
1997-2005 (2006 data not available).

Source: Eurostat (on line database).

Table 3. ER (1997 and 2006) distance to Lisbon objective levels and
(2006) 15-64 ER composition

                  (1997) 2006 ER        2006       2006
              distance to EU goal (1)    ER    Employees ER

EU-15               (-9.3) -4.0         66.0       56.0
EMU-12             (-11.6) -5.5         64.5       54.3
Belgium            (-11.6) -9.0         61.0       52.1
Denmark             (+4.9) +7.4         77.4       70.7
Germany             (-6.3) -2.8         67.2       59.8
Ireland (4)        (-12.4) -1.4         68.6       58.0
Greece             (-14.9) -9.0         61.0       39.3
Spain              (-20.5) -5.2         64.8       53.4
France             (-10.4) -7.0         63.0       56.0
Italy              (-18.7) -11.6        58.4       43.5
Luxembourg         (-10.1) -6.4         63.6       58.6
Netherlands         (-1.5) +4.3         74.3       65.3
Austria             (-2.2) +0.2         70.2       61.2
Portugal            (-4.3) -2.1         67.9       54.2
Finland             (-6.7) -0.7         69.3       60.8
Sweden              (-0.5) +3.1         73.1       65.8
U. K.               (-0.1) +1.5         71.5       62.3

                    2006               2006
              Temporary ER (2)   Part time ER (3)

EU-15                8.2               13.2
EMU-12               9.0               12.2
Belgium              4.5               13.4
Denmark              6.3               17.7
Germany              8.7               17.0
Ireland (4)          1.9                2.7
Greece               4.2                3.3
Spain               18.2                7.7
France               7.5               10.8
Italy                5.7                7.6
Luxembourg           3.6               10.9
Netherlands         10.7               34.0
Austria              5.5               14.9
Portugal            11.2                5.5
Finland              9.9                9.3
Sweden              11.2               17.3
U. K.                3.5               17.5

Note: (1) 70% (as defined by Lisbon Council in 2000); (2) Temporary
ER = 15-64 temporary employees x 100 / 15-64 population. Temporary
contracts for employees may be part-time or full-time; (3) Part-time
ER = 15-64 part-time employment x 100 / 15-64 population. Part-time
may be (i) permanent or temporary contracts for employees and (ii)
self-employment; (4) Ireland 1997-2005 (2006 data not available).

Source: Eurostat (on line database) and our elaboration on Eurostat
data.

Table 4. Harmonized unemploymnent rate (UR) levels and dynamics

                 1997    1998    1999    2000    2001    2002    2003

EU-15             9.8     9.2     8.5     7.6     7.2     7.5     7.9
EMU-12           10.5    10.0     9.1     8.2     7.8     8.2     8.7
Belgium           9.2     9.3     8.5     6.9     6.6     7.5     8.2
Denmark           5.2     4.9     5.2     4.3     4.5     4.6     5.4
Germany           9.1     8.8     7.9     7.2     7.4     8.2     9.0
Ireland           9.9     7.5     5.7     4.2     4.0     4.5     4.7
Greece            9.8    10.8    12.0    11.2    10.7    10.3     9.7
Spain            16.7    15.0    12.5    11.1    10.3    11.1    11.1
France           11.5    11.1    10.5     9.1     8.4     8.7     9.5
Italy            11.3    11.3    10.9    10.1     9.1     8.6     8.4
Luxembourg        2.7     2.7     2.4     2.3     2.0     2.7     3.7
Netherlands       4.9     3.8     3.2     2.8     2.2     2.8     3.7
Austria           4.4     4.5     3.9     3.6     3.6     4.2     4.3
Portugal          6.8     5.1     4.5     4.0     4.0     5.0     6.3
Finland          12.7    11.4    10.2     9.8     9.1     9.1     9.0
Sweden            9.9     8.2     6.7     5.6     4.9     4.9     5.6
U. K.             6.8     6.1     5.9     5.3     5.0     5.1     4.9
Coeff. of var.   0.419   0.435   0.449   0.474   0.471   0.419   0.358
U. S.             4.9     4.5     4.2     4.0     4.8     5.8     6.0
Japan             3.4     4.1     4.7     4.7     5.0     5.4     5.3

                                           [DELTA]
                 2004    2005    2006     1997-2006

                                         p. p.     %

EU-15             8.0     7.9     7.4    -2.4    -24.5
EMU-12            8.8     8.6     7.9    -2.6    -24.8
Belgium           8.4     8.4     8.2    -1.0    -10.9
Denmark           5.5     4.8     3.9    -1.3    -25.0
Germany           9.5     9.5     8.4    -0.7     -7.7
Ireland           4.5     4.3     4.4    -5.5    -55.6
Greece           10.5     9.8     8.9    -0.9     -9.2
Spain            10.6     9.2     8.5    -8.2    -49.1
France            9.6     9.7     9.5    -2.0    -17.4
Italy             8.0     7.7     6.8    -4.5    -39.8
Luxembourg        5.1     4.5     4.7    +2.0    +74.1
Netherlands       4.6     4.7     3.9    -1.0    -20.4
Austria           4.8     5.2     4.8    +0.4     +9.1
Portugal          6.7     7.6     7.7    +0.9    +13.2
Finland           8.8     8.4     7.7    -5.0    -39.4
Sweden            6.3     7.4     7.1    -2.8    -28.3
U. K.             4.7     4.8     5.3    -1.5    -22.1
Coeff. of var.   0.317   0.300   0.294
U. S.             5.5     5.1     4.6    -0.3     -6.1
Japan             4.7     4.4     4.1    +0.7    +20.6

Source: Eurostat (online database).

Table 5. Harmonized long-term unemployment rate (LTUR) levels and
dynamics

                 1997    1998    1999    2000    2001    2002    2003

EU-15             4.8     4.3     3.9     3.4     3.1     3.1     3.3
EMU-12            5.4     5.0     4.4     3.9     3.5     3.6     3.9
Belgium           5.4     5.6     4.8     3.7     3.2     3.7     3.7
Denmark           1.5     1.3     1.1     0.9     0.9     0.9     1.1
Germany           4.6     4.5     4.1     3.7     3.7     3.9     4.5
Ireland           5.6     3.9     2.4     1.6     1.3     1.3     1.5
Greece            5.3     5.8     6.5     6.1     5.5     5.3     5.3
Spain             8.7     7.5     5.7     4.6     3.7     3.7     3.7
France            4.7     4.5     4.1     3.5     3.0     3.0     3.7
Italy             7.3     6.8     6.7     6.3     5.7     5.1     4.9
Luxembourg        0.9     0.9     0.7     0.6     0.6     0.7     0.9
Netherlands       2.3     1.5     1.2     0.8     0.6     0.7     1.0
Austria           1.3     1.3     1.2     1.0     0.9     1.1     1.1
Portugal          3.2     2.2     1.8     1.7     1.5     1.7     2.2
Finland           4.9     4.1     3.0     2.8     2.5     2.3     2.3
Sweden            3.1     2.6     1.9     1.4     1.0     1.0     1.0
U. K.             2.5     1.9     1.7     1.4     1.3     1.1     1.1
Coeff. of var.   0.549   0.591   0.655   0.711   0.725   0.685   0.633
U. S.             0.4     0.4     0.3     0.2     0.3     0.5     0.7
Japan             0.7     0.8     1       1.2     1.3     1.7     1.8

                                            [DELTA]
                 2004    2005    2006    1997-2006 (1)

                                         p. p.      %

EU-15             3.4     3.3     3.1    -1.7     -35.4
EMU-12            4.0     3.8     3.6    -1.8     -33.3
Belgium           4.1     4.4     4.2    -1.2     -22.2
Denmark           1.2     1.1     0.8    -0.7     -46.7
Germany           5.4     5.0     4.7    +0.1      +2.2
Ireland           1.6     1.5     1.4    -4.2     -75.0
Greece            5.6     5.1     4.8    -0.5      -9.4
Spain             3.4     2.2     1.9    -6.8     -78.2
France            3.9     4.0     4.0    -0.7     -14.9
Italy             4.0     3.9     3.4    -3.9     -53.4
Luxembourg        1.1     1.2     1.4    +0.5      55.6
Netherlands       1.6     1.9     1.7    -0.6     -26.1
Austria           1.3     1.3     1.3     0.0       0.0
Portugal          2.9     3.7     3.8    +0.6     +18.8
Finland           2.1     2.2     1.9    -3.0     -61.2
Sweden            1.2     1.2     1.1    -2.0     -64.5
U. K.             1.0     1.0     1.2    -1.3     -52.0
Coeff. of var.   0.595   0.576   0.579
U. S.             0.7     0.6     n.a.   +0.2     +50.0
Japan             1.6     1.5     n.a.   +0.8    +114.3

Note: (1) LTUR = long-term unemployment x 100 / labour force
(2) [DELTA] 1997-2005 for US and Japan

Source: Eurostat (online database).

Table 6. Summary statistics for labour market performance indicators
of EU-15 regions

              1999    2000    2001    2002    2003    2004    2005

                                       ER

Mean          63.1    64.2    64.7    64.8    65.1    65.1    65.8
Median        63.5    64.5    64.8    64.9    65.4    65.5    66.4
Minimum       38.7    37.8    40.7    41.9    42.0    43.4    44.1
Maximum       79.0    80.1    79.2    79.0    78.1    78.2    78.0
Coeff. of     0.125   0.122   0.119   0.115   0.109   0.103   0.100
  variation
                                       UR

Mean           9.1     8.1     7.3     7.6     7.9     8.1     8.1
Median         7.5     6.5     6.0     6.4     6.8     7.2     7.3
Minimum        2.4     2.1     1.6     1.9     2.0     2.4     2.6
Maximum       28.0    26.0    25.7    24.6    23.4    23.4    22.3
Coeff. of     0.575   0.623   0.631   0.589   0.560   0.527   0.510
  variation
                                      LTUR

Mean           4.1     3.6     3.1     3.1     3.3     3.4     3.4
Median         3.2     2.6     2.2     2.1     2.4     2.4     2.5
Minimum        0.3     0.3     0.2     0.2     0.2     0.2     0.4
Maximum       18.4    17.7    17.4    15.5    15.1    15.0    13.7
Coeff. of     0.810   0.891   0.985   0.972   0.925   0.875   0.866
  variation

Source: our elaborations on Eurostat data (online database).

Table 7. Transition matrixes: probability of moving to another quintile
for the EU-15 regions (1999-2005)

                       ER

          1      2      3      4      5    Total

1       82.8   16.8    0.4    0.0    0.0   100.0
2        6.2   74.0   19.8    0.0    0.0   100.0
3        0.0    6.8   77.3   15.9    0.0   100.0
4        0.0    0.0    6.9   78.1   15.1   100.0
5        0.0    0.0    0.0    9.2   90.8   100.0

Total   18.8   19.5   21.1   20.1   20.5   100.0

                       UR

          1      2      3      4      5    Total

1       85.0   15.0    0.0    0.0    0.0   100.0
2       16.5   61.9   20.8    0.9    0.0   100.0
3        0.5   22.5   57.7   19.4    0.0   100.0
4        0.5    2.4   19.1   72.3    5.7   100.0
5        0.0    0.0    0.4   14.1   85.5   100.0

Total   22.6   20.1   19.2   19.8   18.3   100.0

                      LTUR

          1      2       3     4      5    Total

1       84.2   15.3    0.5    0.0    0.0   100.0
2       23.5   62.4   13.7    0.4    0.0   100.0
3        0.0   21.8   57.6   20.5    0.0   100.0
4        0.0    3.6   27.1   61.3    8.0   100.0
5        0.0    0.0    0.0   10.0   90.0   100.0

Total   21.5   21.0   20.1   18.7   18.7   100.0

Source: our elaborations on Eurostat data (online database).

Table 8. Annual GDP growth rates and % employment changes

                   1997    1998    1999   2000   2001   2002   2003

EU-15      GDP      2.6     2.9     3.0    3.8    1.9    1.1    1.1
           Empl.    1.0     1.7     1.9    2.2    1.4    0.7    0.5

EMU-12     GDP      2.6     2.8     3.0    3.8    1.9    0.9    0.8
           Empl.    0.9     1.9     2.0    2.4    1.5    0.7    0.4

Belgium    GDP      3.5     1.7     3.4    3.7    0.8    1.5    1.0
           Empl.    0.5     1.6     1.3    2.0    1.4   -0.1    0.0

Denmark    GDP      3.2     2.2     2.6    3.5    0.7    0.5    0.4
           Empl.    1.2     1.5     1.0    0.4    0.8   -0.1   -1.3

Germany    GDP      1.8     2.0     2.0    3.2    1.2    0.0   -0.2
           Empl.   -0.1     1.2     1.4    1.9    0.4   -0.6   -0.9

Ireland    GDP     11.7     8.5    10.7    9.4    5.8    6.0    4.3
           Empl.    5.6     8.6     6.2    4.6    3.0    1.8    2.0

Greece     GDP      3.6     3.4     3.4    4.5    5.1    3.8    4.8
           Empl.   -0.5     2.9     0.3    0.5    0.3    0.2    1.5

Spain      GDP      3.9     4.5     4.7    5.0    3.6    2.7    3.0
           Empl.    3.6     4.5     4.6    5.1    3.2    2.4    3.1

France     GDP      2.2     3.5     3.3    3.9    1.9    1.0    1.1
           Empl.    0.4     1.5     2.0    2.7    1.8    0.6    0.1

Italy      GDP      1.9     1.4     1.9    3.6    1.8    0.3    0.0
           Empl.    0.3     1.0     1.1    1.9    2.2    1.6    1.5

Luxemb.    GDP      5.9     6.5     8.4    8.4    2.5    3.8    1.3
           Empl.    3.1     4.5     5.0    5.5    5.6    2.9    1.8

Netherl.   GDP      4.3     3.9     4.7    3.9    1.9    0.1    0.3
           Empl.    3.3     4.1     3.9    3.1    2.6    0.5   -0.5

Austria    GDP      1.8     3.6     3.3    3.4    0.8    0.9    1.1
           Empl.    0.9     1.3     1.6    1.0    0.6   -0.1    0.0

Portugal   GDP      4.2     4.8     3.9    3.9    2.0    0.8   -0.7
           Empl.    n.a.    n.a.    1.9    1.7    1.6    0.5   -0.4

Finland    GDP      6.1     5.2     3.9    5.0    2.6    1.6    1.8
           Empl.    3.3     2.0     2.5    2.2    1.5    1.0    0.1

Sweden     GDP      2.3     3.7     4.5    4.3    1.1    2.0    1.7
           Empl.   -1.3     1.6     2.1    2.4    1.9    0.2   -0.3

U. K.      GDP      3.0     3.3     3.0    3.8    2.4    2.1    2.7
           Empl.    1.8     1.0     1.4    1.2    0.8    0.8    1.0

U.S.       GDP      4.5     4.2     4.4    3.7    0.8    1.6    2.5
           Empl.    2.3     2.1     1.9    2.0   -0.7   -0.3    0.9

                   2004   2005   2006    corr.

EU-15      GDP      2.3    1.6    2.8    0.860
           Empl.    0.7    0.8    1.3   (0.001)

EMU-12     GDP      2.0    1.5    2.7    0.870
           Empl.    0.7    0.8    1.4   (0.001)

Belgium    GDP      3.0    1.1    3.2    0.275
           Empl.    0.6    1.0    0.9   (0.441)

Denmark    GDP      2.1    3.1    3.2    0.631
           Empl.    0.0    0.7    1.8   (0.051)

Germany    GDP      1.2    0.9    2.8    0.874
           Empl.    0.4   -0.1    0.7   (0.001)

Ireland    GDP      4.3    5.5    6.0    0.673
           Empl.    3.1    4.6    4.2   (0.033)

Greece     GDP      4.7    3.7    4.3    0.162
           Empl.    3.4    0.9    1.4   (0.654)

Spain      GDP      3.2    3.5    3.9    0.928
           Empl.    3.5    3.8    3.3   (0.000)

France     GDP      2.5    1.7    2.0    0.722
           Empl.    0.0    0.5    0.8   (0.018)

Italy      GDP      1.2    0.1    1.9    0.319
           Empl.    0.4    0.3    1.7   (0.369)

Luxemb.    GDP      3.6    4.0    6.2    0.588
           Empl.    2.3    3.0    3.7   (0.074)

Netherl.   GDP      2.0    1.5    2.9    0.823
           Empl.   -0.9    0.0    1.2   (0.004)

Austria    GDP      2.4    2.0    3.1    0.761
           Empl.    0.0    0.0    0.5   (0.011)

Portugal   GDP      1.3    0.5    1.3    0.925
           Empl.    0.1    0.0    0.6   (0.001)

Finland    GDP      3.7    2.9    5.5    0.704
           Empl.    0.4    1.4    1.4   (0.023)

Sweden     GDP      4.1    2.9    4.2    0.392
           Empl.   -0.6    0.4    1.8   (0.262)

U. K.      GDP      3.3    1.9    2.8    0.436
           Empl.    1.0    0.9    0.8   (0.208)

U.S.       GDP      3.9    3.2    3.3    0.928
           Empl.    1.1    1.7    1.9   (0.001)

Source: Eurostat online database and our elaborations.

Note: p-values of correlation coefficients in brackets.

Table 9. Pooled bivariate regressions between GDP and employment growth
(1997-2006) in EU-15

148 observation *        % Empl. growth

                     coefficient   p-values

% GDP growth            0.598        0.000
constant               -0.249        0.136

Adjusted [R.sup.2]      0.544

Data on employment growth in Portugal for 1997 and 1998 are missing

Table 10. Employment elasticity with respect to GDP in EU-15 countries

               1997   1998   1999   2000   2001    2002    2003    2004

EU-15          0.38   0.59   0.63   0.58   0.74    0.64    0.45    0.30
EMU-12         0.35   0.68   0.67   0.63   0.79    0.78    0.50    0.35
Belgium        0.14   0.94   0.38   0.54   1.75   -0.07    0.00    0.20
Denmark        0.38   0.68   0.38   0.11   1.14   -0.20   -3.25    0.00
Germany       -0.06   0.60   0.70   0.59   0.33    n.a.    4.50    0.33
Ireland        0.48   1.01   0.58   0.49   0.52    0.30    0.47    0.72
Greece        -0.14   0.85   0.09   0.11   0.06    0.05    0.31    0.72
Spain          0.92   1.00   0.98   1.02   0.89    0.89    1.03    1.09
France         0.18   0.43   0.61   0.69   0.95    0.60    0.09    0.00
Italy          0.16   0.71   0.58   0.53   1.22    5.33    n.a.    0.33
Luxembourg     0.53   0.69   0.60   0.65   2.24    0.76    1.38    0.64
Netherlands    0.77   1.05   0.83   0.79   1.37    5.00   -1.67   -0.45
Austria        0.50   0.36   0.48   0.29   0.75   -0.11    0.00    0.00
Portugal       n.a.   n.a.   0.49   0.44   0.80    0.63    0.57    0.08
Finland        0.54   0.38   0.64   0.44   0.58    0.63    0.06    0.11
Sweden        -0.57   0.43   0.47   0.56   1.73    0.10   -0.18   -0.15
U. K.          0.60   0.30   0.47   0.32   0.33    0.38    0.37    0.30

               2005   2006

EU-15          0.50   0.46
EMU-12         0.53   0.52
Belgium        0.91   0.28
Denmark        0.23   0.56
Germany       -0.11   0.25
Ireland        0.84   0.70
Greece         0.24   0.33
Spain          1.09   0.85
France         0.29   0.40
Italy          3.00   0.89
Luxembourg     0.75   0.60
Netherlands    0.00   0.41
Austria        0.25   0.45
Portugal       0.00   0.46
Finland        0.48   0.25
Sweden         0.14   0.43
U. K.          0.47   0.29

Source: our processing of Eurostat data.

Note: Elasticity is defined as Employment % change / GDP % change.

Table 11. Bivariate regression between change of labour market
indicators and GDP % growth at regional level (1999-2005)

187 observations                   Dependent variables
                           % ER growth              % UR growth

                     coefficient   p-values   coefficient   p-values

% GDP growth            0.207        0.003      -1.944        0.000
Constant                0.022        0.013       0.214        0.000

Adjusted [R.sup.2]      0.042                    0.104

187 observations      Dependent variables
                         % LTUR growth

                     coefficient   p-values

% GDP growth           -3.103        0.000
Constant                0.258        0.000

Adjusted [R.sup.2]      0.160

Table 12. Bivariate regression between GDP % growth and (un)employment
growth (1999-2005) at regional level

187 observations                   Dependent variables
                         % Empl. growth          % Unempl. growth

                     coefficient   p-values   coefficient   p-values

% GDP growth            0.610       0.000       -1.683       0.000
                        0.007       0.596        0.244       0.000

Adjusted [R.sup.2]      0.151                    0.067

187 observations        Dependent variables
                     % Long T. unempl. growth

                      coefficient   p-values

% GDP growth            -3.009        0.000
                         0.295        0.000

Adjusted [R.sup.2]       0.137

Table 13. Dynamics of Moran's spatial correlation Index in EU-15
regions (203 units)

        1999    2000    2001    2002    2003    2004    2005

ER     0.424   0.419   0.410   0.407   0.424   0.456   0.414
UR     0.324   0.315   0.335   0.334   0.383   0.459   0.512
LTUR   0.333   0.340   0.332   0.357   0.427   0.494   0.531

* All correlations are significant at 99%

Table 14. Econometric estimates: model 1--institutional variable not
corrected (1999 and 2003)

                                ER

                      1999                2005

                Coeff.   P_values   Coeff.   P_values

LTUR            -1.384     0.000    -2.530     0.000
CDE             -0.131     0.212     0.113     0.241
F                0.323     0.105     0.067     0.698
GHI             -0.236     0.026     0.033     0.732
JK               0.359     0.002     0.214     0.029
L_Q             -0.331     0.008    -0.066     0.523
GDP              0.250     0.001     0.221     0.000
HOURS_corr      -0.276     0.002    -0.022     0.844
DIPEN           -0.001     0.995    -0.129     0.091
DENS            -1.654     0.000    -1.875     0.000
LAB_COST        -0.215     0.754     1.808     0.000
TAX_WEDGE        0.004     0.992    -1.518     0.000
ACT_POL         -2.544     0.157    -1.884     0.468
PASS_POL_corr    0.232     0.041     1.059     0.000
PMRI            -9.045     0.007    -9.487     0.044
EPL_2            0.090     0.982    -0.248     0.837
CENTR           -5.762     0.203    19.535     0.000
CENTR_2          0.486     0.508    -2.993     0.000
COORD            5.709     0.002     5.310     0.000
COVER            0.119     0.097    -0.284     0.000
UNION            1.834     0.711     6.731     0.102
_cons           97.521     0.000    62.266     0.000

Adjusted R2      0.915               0.906

                                UR

                      1999                2005

                Coeff.   P_values   Coeff.   P_values

LTUR
CDE             -0.243     0.006    -0.226     0.000
F               -0.559     0.001    -0.201     0.060
GHI             -0.151     0.084    -0.200     0.001
JK              -0.246     0.009    -0.152     0.012
L_Q             -0.021     0.841    -0.059     0.354
GDP             -0.284     0.000    -0.139     0.000
HOURS_corr       0.164     0.022    -0.070     0.315
DIPEN            0.109     0.123     0.156     0.001
DENS             0.996     0.000     0.849     0.000
LAB_COST        -2.331     0.000    -0.967     0.000
TAX_WEDGE        1.067     0.001     0.428     0.000
ACT_POL         -3.936     0.007    -3.627     0.024
PASS_POL_corr    0.954     0.000     0.686     0.000
PMRI             5.694     0.039    -1.078     0.686
EPL_2           -6.961     0.033     0.065     0.931
CENTR            6.353     0.085    -8.233     0.000
CENTR_2         -1.680     0.005     0.889     0.006
COORD           -3.176     0.041    -0.142     0.773
COVER            0.023     0.698     0.141     0.004
UNION           -8.767     0.036     3.705     0.132
_cons           29.985     0.001    20.962     0.000

Adjusted R2      0.865               0.909

                                LTUR

                     1999                2005

                Coeff.   P_values   Coeff.   P_values

LTUR
CDE             -0.146     0.036    -0.088     0.033
F               -0.386     0.003    -0.170     0.021
GHI             -0.119     0.088    -0.084     0.043
JK              -0.105     0.160    -0.084     0.043
L_Q              0.039     0.636     0.028     0.518
GDP             -0.198     0.000    -0.071     0.002
HOURS_corr       0.120     0.035     0.066     0.166
DIPEN            0.060     0.288     0.049     0.136
DENS             0.582     0.005     0.319     0.004
LAB_COST        -1.055     0.020     0.129     0.285
TAX_WEDGE        0.576     0.018    -0.012     0.876
ACT_POL         -3.969     0.001    -2.457     0.026
PASS_POL_corr    0.520     0.000     0.486     0.000
PMRI             4.738     0.031    10.619     0.000
EPL_2           -3.536     0.173     0.336     0.514
CENTR            9.222     0.002     2.541     0.096
CENTR_2         -1.837     0.000    -0.476     0.031
COORD           -1.499     0.223    -0.551     0.106
COVER           -0.084     0.077    -0.101     0.003
UNION           -2.711     0.412     6.358     0.000
_cons            7.073     0.321    -9.932     0.051

Adjusted R2      0.782               0.913

Table 15. Econometric estimates: model 2--institutional variable
corrected (1999 and 2005)

                                  ER

                       1999                2005

                 Coeff.   P_values   Coeff.   P_values

LTUR             -1.352     0.000    -2.434     0.000
CDE              -0.203     0.057     0.124     0.219
F                 0.258     0.186     0.188     0.288
GHI              -0.302     0.005     0.070     0.484
JK                0.290     0.011     0.250     0.015
L_Q              -0.446     0.001    -0.077     0.480
GDP               0.252     0.001     0.229     0.000
HOURS_corr       -0.343     0.000    -0.172     0.111
DIPEN            -0.315     0.012    -0.170     0.099
DENS             -1.597     0.000    -1.812     0.000
LAB_COST          0.523     0.459     1.473     0.000
TAX_WEDGE        -0.278     0.461    -1.274     0.000
ACT_POL          -2.187     0.168    -2.494     0.354
PASS_POL_corr     0.216     0.042     1.008     0.000
PMRI            -14.028     0.000     5.994     0.191
EPL_2_corr        9.304     0.067    -0.360     0.822
CENTR_corr      -16.740     0.001    14.481     0.000
CENTR_2_corr      2.647     0.007    -2.622     0.000
COORD_corr        5.669     0.005     6.662     0.000
COVER_corr        0.121     0.134    -0.222     0.011
UNION_corr        8.325     0.185     5.324     0.275
_cons           132.339     0.000    73.414     0.000

Adjusted R2       0.917               0.899

                                 UR

                      1999               2005

                Coeff.   P_values   Coeff.   P_values

LTUR
CDE             -0.274     0.004    -0.232     0.000
F               -0.470     0.007    -0.202     0.054
GHI             -0.169     0.075    -0.200     0.001
JK              -0.254     0.012    -0.160     0.009
L_Q             -0.059     0.606    -0.066     0.305
GDP             -0.247     0.000    -0.140     0.000
HOURS_corr       0.182     0.014    -0.055     0.391
DIPEN            0.489     0.000     0.140     0.021
DENS             0.912     0.001     0.856     0.000
LAB_COST        -1.798     0.004    -0.907     0.000
TAX_WEDGE        0.932     0.005     0.428     0.000
ACT_POL         -1.604     0.249    -3.464     0.030
PASS_POL_corr    0.896     0.000     0.679     0.000
PMRI             5.289     0.062    -0.080     0.975
EPL_2_corr      -4.499     0.318     0.348     0.716
CENTR_corr       3.467     0.428    -9.261     0.000
CENTR_2_corr    -1.415     0.093     1.178     0.001
COORD_corr      -5.479     0.002    -0.322     0.558
COVER_corr      -0.031     0.662     0.136     0.008
UNION_corr      -6.954     0.214     4.786     0.092
_cons           -6.387     0.579    20.614     0.013

Adjusted R2      0.852               0.909

                                 LTUR

                     1999                 2005

                Coeff.   P_values    Coeff.   P_values

LTUR
CDE             -0.173     0.021     -0.081     0.053
F               -0.302     0.028     -0.145     0.048
GHI             -0.136     0.072     -0.074     0.074
JK              -0.109     0.176     -0.071     0.092
L_Q              0.001     0.987      0.034     0.447
GDP             -0.169     0.001     -0.070     0.003
HOURS_corr       0.112     0.057      0.035     0.439
DIPEN            0.313     0.000      0.103     0.015
DENS             0.532     0.014      0.335     0.003
LAB_COST        -0.803     0.108      0.043     0.706
TAX_WEDGE        0.569     0.032      0.037     0.605
ACT_POL         -2.606     0.019     -2.570     0.021
PASS_POL_corr    0.477     0.000      0.489     0.000
PMRI             4.002     0.077      9.494     0.000
EPL_2_corr      -1.361     0.705      0.174     0.794
CENTR_corr       6.804     0.052      1.238     0.394
CENTR_2_corr    -1.714     0.011     -0.359     0.139
COORD_corr      -3.309     0.018     -0.492     0.200
COVER_corr      -0.125     0.027     -0.083     0.020
UNION_corr      -1.554     0.727      6.405     0.001
_cons          -15.219     0.021    -12.837     0.026

Adjusted R2      0.762                0.911

Table 16. Econometric estimates: changes between 1999 and 2005

      187 observations      [DELTA]ER             [DELTA]UR

                         coeff.   p-values   coeff.   p-values

(1)   EPL_2              -0.045     0.144    -0.428     0.022
      _cons               0.045     0.000    -0.018     0.494
      Adj R-squared =     0.006               0.023

(2)   EPL_2_corr          0.000     0.994    -0.625     0.001
      _cons               0.046     0.000    -0.017     0.497
      Adj R-squared =    -0.005               0.057

(3)   HOURS_corr          0.040     0.581    -2.851     0.000
      _cons               0.049     0.000    -0.190     0.000
      Adj R-squared =    -0.004               0.218

(4)   TAX_WEDGE           0.004     0.913    -0.551     0.024
      _cons               0.046     0.000     0.006     0.807
      Adj R-squared =    -0.005               0.022

(5)   ACT_POL             0.146     0.000    -0.383     0.000
      PASS_POL_corr      -0.063     0.000     0.630     0.000
      PMRI               -0.365     0.000     0.775     0.000
      EPL_2_corr          0.169     0.000    -0.086     0.383
      CENTR_corr          0.609     0.000    -0.885     0.036
      UNION_corr         -0.425     0.000     0.209     0.156
      _cons              -0.088     0.000     0.169     0.002
      Adj R-squared =     0.588               0.897

(6)   ACT_POL             0.145     0.000    -0.386     0.000
      PASS_POL_corrr     -0.063     0.000     0.631     0.000
      PMRI               -0.364     0.000     0.777     0.000
      EPL_2_corr          0.170     0.000    -0.082     0.411
      CENTR_corr          0.718     0.000    -0.527     0.343
      CENTR_2_corr       -1.916     0.352    -6.256     0.321
      UNION_corr         -0.440     0.000     0.161     0.300
      _cons              -0.089     0.000     0.167     0.003
      Adj R-squared =     0.587               0.897

(7)   ACT_POL             0.121     0.000    -0.327     0.000
      PASS_POL_corrr     -0.064     0.000     0.632     0.000
      PMRI               -0.294     0.000     0.617     0.000
      EPL_2_corr          0.214     0.000    -0.188     0.055
      CENTR_corr          0.351     0.009    -0.308     0.468
      UNION_corr         -0.285     0.000    -0.106     0.505
      LAB_COST           -0.228     0.000     0.511     0.000
      _cons              -0.024     0.219     0.025     0.690
      Adj R-squared =     0.657               0.906

(8)   ACT_POL             0.118     0.000    -0.329     0.000
      PASS_POL_corr      -0.064     0.000     0.632     0.000
      PMRI               -0.289     0.000     0.620     0.000
      EPL_2_corr          0.220     0.000    -0.185     0.061
      CENTR_corr          0.560     0.001    -0.195     0.717
      CENTR_2_corr       -3.897     0.039    -2.109     0.730
      UNION_corr         -0.307     0.000    -0.118     0.469
      LAB_COST           -0.241     0.000     0.505     0.000
      _cons              -0.022     0.261     0.026     0.677
      Adj R-squared =     0.664               0.906

      187 observations       [DELTA]LTUR

                         coeff.   p-values

(1)   EPL_2              -0.708     0.003
      _cons              -0.112     0.001
      Adj R-squared =     0.040

(2)   EPL_2_corr         -0.944     0.000
      _cons              -0.110     0.001
      Adj R-squared =     0.078

(3)   HOURS_corr         -2.942     0.000
      _cons              -0.285     0.000
      Adj R-squared =     0.135

(4)   TAX_WEDGE          -0.873     0.006
      _cons              -0.073     0.035
      Adj R-squared =     0.035

(5)   ACT_POL            -0.548     0.000
      PASS_POL_corr       0.807     0.000
      PMRI                0.880     0.001
      EPL_2_corr         -0.427     0.014
      CENTR_corr         -2.148     0.004
      UNION_corr          1.166     0.000
      _cons               0.174     0.071
      Adj R-squared =     0.815

(6)   ACT_POL            -0.541     0.000
      PASS_POL_corrr      0.804     0.000
      PMRI                0.876     0.002
      EPL_2_corr         -0.437     0.012
      CENTR_corr         -2.868     0.003
      CENTR_2_corr       12.564     0.253
      UNION_corr          1.263     0.000
      _cons               0.179     0.064
      Adj R-squared =     0.815

(7)   ACT_POL            -0.552     0.000
      PASS_POL_corrr      0.807     0.000
      PMRI                0.891     0.002
      EPL_2_corr         -0.420     0.020
      CENTR_corr         -2.188     0.005
      UNION_corr          1.187     0.000
      LAB_COST           -0.035     0.873
      _cons               0.184     0.108
      Adj R-squared =     0.814

(8)   ACT_POL            -0.540     0.000
      PASS_POL_corr       0.804     0.000
      PMRI                0.874     0.002
      EPL_2_corr         -0.438     0.015
      CENTR_corr         -2.865     0.004
      CENTR_2_corr       12.614     0.259
      UNION_corr          1.260     0.000
      LAB_COST            0.006     0.978
      _cons               0.177     0.123
      Adj R-squared =     0.814

Table 17. Moran I index of global spatial correlation for changes
(1999-2005) of all variables considered (regional level)

Variable          Moran's I   P-value

EMP                 0.254     0.000
ER                  0.314     0.000
UNEMPL              0.523     0.000
UR                  0.534     0.000
LONG UNEMP          0.520     0.000
LTUR                0.523     0.000
CDE                 0.433     0.000
F                   0.562     0.000
GHI                 0.051     0.069
JK                  0.329     0.000
L_Q                 0.256     0.000
GDP (per capita     0.412     0.000
GDP                 0.418     0.000
PART_T              0.380     0.000
FULL_T              0.519     0.000
DIPEN               0.336     0.000
SELF                0.236     0.000
HOURS               0.331     0.000
HOURS_corr          0.589     0.000
DENS                0.178     0.000
LAB_COST            0.624     0.000
TAX_WEDGE           0.552     0.000
ACT_POL             0.503     0.000
PASS_POL            1.033     0.000
PASS_POL_corr       0.712     0.000
IRBM                0.825     0.000
EPL_2               0.715     0.000
EPL_2_ corr         0.669     0.000
CENTR_ corr         0.336     0.000
CENT_ 2_corr        0.107     0.000
COORD_corr          0.336     0.000
COVER_corr          0.336     0.000
UNION               0.709     0.000
UNION_corr          0.652     0.000

Table 18. Econometric estimates (dependent variable: employment rate)
(1999-2005)

ER                                Fixed effects          Correlated
                                                         PCSE (fe) *

                                Coeff.   p-values    Coeff.   p-values

LTUR                            -0.541     0.000     -0.543     0.000
CDE                             -0.053     0.223     -0.065     0.239
F                                0.016     0.786      0.008     0.923
GHI                             -0.011     0.800     -0.020     0.720
JK                               0.109     0.037      0.089     0.145
L_Q                              0.126     0.001      0.103     0.113
GDP                             -0.046     0.548     -0.037     0.681
HOURS_corr                      -0.056     0.177     -0.071     0.312
DENS                            -9.696     0.000     -9.565     0.000
LAB COST                        -0.162     0.001     -0.153     0.102
TAX_WEDGE                        0.044     0.128      0.029     0.643
ACT_POL                          2.501     0.000      2.262     0.007
PASS_POL_corr                   -0.181     0.000     -0.160     0.013
PMRI                            -4.805     0.000     -4.667     0.000
EPL_2_corr                       3.825     0.000      3.736     0.000
CENTR_corr                      21.811     0.105     23.464     0.233
CENTR_corr_2                    -2.729     0.082     -2.790     0.169
COORD_corr                     -18.834     0.024    -17.725     0.201
COVER_corr                       0.098     0.681      0.029     0.932
UNION_corr                     -13.838     0.008    -13.002     0.120
duminy_1999                      0.500     0.295      0.466     0.454
dummy_2000                       0.673     0.085      0.687     0.144
dummy_2001                       0.436     0.180      0.462     0.237
dummy_2002                       0.137     0.584      0.160     0.583
dummy_2003                       0.028     0.879      0.041     0.836
dummy_2004                      -0.382     0.003     -0.364     0.001
_cons                           66.993     0.000    110.136     0.000

n. of observations               1309                 1309
n. of groups                      187                  187

F (26,1096)                     67.170     0.000
R-sq within                      0.614
R sq between                     0.000
R sq overall                     0.001
R  squared                           --        --     0.983

Hausman Test                   705.300     0.000
Wooldridge test                 91.603     0.000
Modified Wald                 3899.850     0.000
(heteroskedasticity)
Breusch-Pagan LM (contemp.   25752.913     0.000
Correlation)

[rho] (AR 1 term)                                     0.151

[rho] /[lambda] (spatial
effects

ER                               ML (fe)                ML (fe)
                                (spatial               (spatial
                                lag-[rho])          error-[lambda])

                              Coeff.   p-values    Coeff.   p-values

LTUR                          -0.469     0.000     -0.535     0.000
CDE                           -0.027     0.475     -0.007     0.849
F                             -0.020     0.696     -0.019     0.724
GHI                           -0.005     0.893      0.019     0.632
JK                             0.090     0.047      0.110     0.019
L_Q                            0.118     0.000      0.128     0.000
GDP                           -0.004     0.947      0.018     0.791
HOURS_corr                    -0.066     0.066     -0.074     0.070
DENS                          -8.165     0.000     -7.521     0.000
LAB COST                      -0.132     0.001     -0.182     0.001
TAX_WEDGE                      0.010     0.699      0.027     0.431
ACT_POL                        1.689     0.000      2.975     0.000
PASS_POL_corr                 -0.152     0.000     -0.187     0.000
PMRI                          -3.394     0.000     -5.284     0.000
EPL_2_corr                     3.261     0.000      4.664     0.000
CENTR_corr                     7.503     0.519    -10.209     0.408
CENTR_corr_2                  -1.334     0.327      0.431     0.765
COORD_corr                   -12.168     0.092     -3.757     0.613
COVER_corr                     0.182     0.377      0.264     0.211
UNION_corr                   -14.079     0.002    -22.073     0.000
duminy_1999                    0.719     0.082      0.793     0.136
dummy_2000                     0.749     0.027      0.952     0.030
dummy_2001                     0.448     0.112      0.640     0.083
dummy_2002                     0.236     0.277      0.296     0.312
dummy_2003                     0.116     0.462      0.108     0.634
dummy_2004                    -0.199     0.077     -0.347     0.053
_cons                             --        --         --        --

n. of observations             1309                 1309
n. of groups                    187                  187

F (26,1096)
R-sq within
R sq between
R sq overall
R  squared                     0.986                0.986

Hausman Test
Wooldridge test
Modified Wald
(heteroskedasticity)
Breusch-Pagan LM (contemp.
Correlation)

[rho] (AR 1 term)

[rho] /[lambda] (spatial       0.359     0.000      0.440     0.000
effects

* Coefficients and p_values of regional fixed effects omitted for sake
of brevity

Table 19. Econometric estimates (dependent variable: unemployment rate)
(1999-2005)

UR                               Fixed effects          Correlated
                                                        PCSE (fe) *

                               Coeff.   p-values    Coeff.   p-values

CDE                            -0.112     0.000     -0.078     0.097
F                               0.029     0.484      0.025     0.690
GHI                            -0.130     0.000     -0.096     0.032
JK                             -0.101     0.006     -0.080     0.038
L_Q                            -0.126     0.000     -0.102     0.008
GDP                            -0.091     0.088     -0.091     0.273
HOURS_corr                     -0.102     0.001     -0.071     0.147
DENS                            3.605     0.018      3.611     0.000
LAB COST                        0.272     0.000      0.262     0.000
TAX_WEDGE                      -0.146     0.000     -0.132     0.002
ACT_POL                         0.314     0.332      0.298     0.645
PASS_POL_corr                   1.005     0.000      0.984     0.000
PMRI                            2.306     0.000      2.174     0.005
EPL_2_corr                     -0.067     0.864      0.003     0.997
CENTR_corr                    -31.568     0.001    -34.298     0.005
CENTR_corr_2                    5.771     0.000      5.697     0.000
COORD_corr                      7.634     0.193      5.837     0.499
COVER_corr                      0.149     0.375      0.261     0.363
UNION_corr                    -10.558     0.004    -10.079     0.061
duminy_1999                     0.662     0.049      0.649     0.305
dummy_2000                      1.026     0.000      0.972     0.076
dummy_2001                      0.632     0.006      0.575     0.222
dummy_2002                      0.341     0.054      0.306     0.377
dummy_2003                     -0.017     0.894     -0.030     0.891
dummy_2004                      0.081     0.372      0.063     0.566
_cons                          29.210     0.000     12.490     0.275

n. of observations              1309                 1309
n. of groups                     187                  187

F (25, 1097)                  161.050
R-sq within                     0.786
R sq between                    0.367
R sq overall                    0.382
R squared                                            0.975

Hausman Test                  118.560     0.000
Wooldridge test                73.381     0.000
Modified Wald               49790.730     0.000
(heteroskedasticity)
Breusch-Pagan LM            32140.835     0.000
(contemp. correlation)

[rho] (AR 1 term)                                    0.245

[rho] / [lambda] (spatial
effects

UR                                ML (fe)             ML (fe)
                                 (spatial             (spatial
                                lag-[rho])         error-[lambda])

                             Coeff.   p-values    Coeff.   p-values

CDE                          -0.122     0.000    -0.100     0.000
F                             0.064     0.069     0.070     0.034
GHI                          -0.113     0.000    -0.095     0.000
JK                           -0.074     0.017    -0.054     0.060
L_Q                          -0.117     0.000    -0.115     0.000
GDP                          -0.060     0.186    -0.068     0.091
HOURS_corr                   -0.052     0.041    -0.061     0.021
DENS                          2.335     0.072     0.096     0.934
LAB COST                      0.242     0.000     0.270     0.000
TAX_WEDGE                    -0.093     0.000    -0.116     0.000
ACT_POL                       0.761     0.006     0.539     0.159
PASS_POL_corr                 0.884     0.000     1.014     0.000
PMRI                          1.572     0.000     2.852     0.000
EPL_2_corr                   -0.171     0.609    -0.170     0.705
CENTR_corr                  -33.020     0.000   -29.611     0.000
CENTR_corr_2                  5.686     0.000     4.763     0.000
COORD_corr                    6.339     0.203     5.220     0.253
COVER_corr                    0.256     0.073     0.240     0.066
UNION_corr                   -5.528     0.076     2.949     0.440
duminy_1999                   0.566     0.048    -0.133     0.741
dummy_2000                    0.965     0.000     0.319     0.353
dummy_2001                    0.787     0.000     0.136     0.646
dummy_2002                    0.406     0.007    -0.046     0.853
dummy_2003                    0.033     0.761    -0.307     0.140
dummy_2004                    0.072     0.354    -0.097     0.597
_cons                            --        --        --        --

n. of observations            1309                1309
n. of groups                   187                 187

F (25, 1097)
R-sq within
R sq between
R sq overall
R squared                     0.983               0.987

Hausman Test
Wooldridge test
Modified Wald
(heteroskedasticity)
Breusch-Pagan LM
(contemp. correlation)

[rho] (AR 1 term)

[rho] / [lambda] (spatial     0.325     0.000     0.687     0.000
effects

* Coefficients and p_values of regional fixed effects omitted for
sake of brevity

Table 20. Econometric estimates (dependent variable: long-term
unemployment rate) (1999-2005)

Long Term UR                  Fixed effects         Correlated
                                                    PCSE (fe) *

                            Coeff.   p-values    Coeff.   p-values

CDE                         -0.040     0.093     -0.035     0.229
F                           -0.050     0.124     -0.048     0.152
GHI                         -0.061     0.011     -0.056     0.037
JK                          -0.098     0.001     -0.098     0.000
L_Q                         -0.012     0.548     -0.013     0.596
GDP                          0.013     0.756      0.007     0.851
HOURS_corr                  -0.015     0.522     -0.010     0.782
DENS                        -1.778     0.133     -1.671     0.004
LAB COST                     0.113     0.000      0.111     0.004
TAX_WEDGE                   -0.082     0.000     -0.079     0.002
ACT_POL                     -0.650     0.010     -0.691     0.049
PASS_POL_c~r                 0.564     0.000      0.557     0.000
PMRI                         1.498     0.000      1.496     0.004
EPL_2_corr                   0.421     0.166      0.407     0.355
CENTR_corr                 -29.026     0.000    -29.468     0.001
CENTR_corr_2                 3.601     0.000      3.595     0.000
COORD_corr                  11.168     0.014     10.809     0.065
COVER_corr                   0.050     0.703      0.072     0.610
UNION_corr                   8.608     0.002      8.553     0.046
duininy_1999                -0.051     0.846     -0.070     0.872
dummy_2000                   0.410     0.055      0.382     0.299
dummy_2001                   0.238     0.180      0.212     0.490
dummy_2002                  -0.047     0.733     -0.065     0.775
dummy_2003                  -0.099     0.319     -0.106     0.455
dummy_2004                  -0.030     0.666     -0.034     0.638
cons                        21.920     0.000     36.593     0.000

n. of observations           1309                 1309
n. of groups                  187                  187

F (25, 1097)               100.920
R-sq within                  0.697
R sq between                 0.015
R sq overall                 0.021
R squared                                         0.970

Hausman Test               159.170     0.000
Wookdridge test             50.571     0.000
Modified Wald            26251.370     0.000
(heteroskedasticity)
Breusch-Pagan LM         24259.791     0.000
(contemp. correlation)

[rho] (AR / term)                                 0.084

[rho] /[lambda]),
(spatial effects term)

Long Term UR                   ML (fe)              ML (fe)
                             (spatialla            (spatial
                             lag-[rho])         error-[lambda])

                          Coeff.   p-values    Coeff.   p-values

CDE                       -0.032     0.105      0.001     0.977
F                         -0.008     0.773      0.004     0.888
GHI                       -0.040     0.045     -0.024     0.228
JK                        -0.060     0.010     -0.033     0.154
L_Q                        0.005     0.761      0.013     0.449
GDP                        0.015     0.669     -0.027     0.404
HOURS_corr                 0.001     0.954     -0.022     0.300
DENS                      -1.864     0.058     -1.516     0.096
LAB COST                   0.104     0.000      0.133     0.000
TAX_WEDGE                 -0.048     0.000     -0.081     0.000
ACT_POL                   -0.084     0.691     -0.641     0.031
PASS_POL_c~r               0.467     0.000      0.558     0.000
PMRI                       0.841     0.001      2.059     0.000
EPL_2_corr                 0.255     0.313      0.444     0.203
CENTR_corr               -27.001     0.000    -20.606     0.001
CENTR_corr_2               3.387     0.000      2.581     0.000
COORD_corr                 8.183     0.030      2.844     0.430
COVER_corr                 0.122     0.258      0.106     0.303
UNION_corr                 9.559     0.000     17.708     0.000
duininy_1999              -0.008     0.971     -0.665     0.033
dummy_2000                 0.397     0.025     -0.103     0.697
dummy_2001                 0.356     0.016     -0.169     0.455
dummy_2002                 0.080     0.487     -0.361     0.055
dummy_2003                -0.041     0.624     -0.349     0.026
dummy_2004                -0.012     0.837     -0.161     0.235
cons                          --        --         --        --

n. of observations         1309                 1309
n. of groups                187                  187

F (25, 1097)
R-sq within
R sq between
R sq overall
R squared                  0.978                0.981

Hausman Test
Wookdridge test
Modified Wald
(heteroskedasticity)
Breusch-Pagan LM
(contemp. correlation)

[rho] (AR / term)

[rho] /[lambda]),          0.409     0.000      0.665     0.000
(spatial effects term)

* Coefficients and p_values of regional fixed effects omitted for sake
of brevity
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Title Annotation:Labour Market Performance Differentials and Dynamics in EU-15 Countries and Regions
Publication:The European Journal of Comparative Economics
Date:Dec 1, 2007
Words:20475
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