46th Congress of the European Regional Science Association: "Enlargement, Southern Europe and the Mediterranean", August 30th - September 3rd, 2006, Volos, Greece
This study investigates the causes of variation in regional unemployment rates in a cross-country perspective. The explanatory variables consist of both regional-level and macro-level variables. An appropriate econometric model of random coefficients for the former and fixed coefficients for the latter variables is developed, further taking into account that observations may be correlated over time and over space and that some of the explanatory variables are not strictly exogenous. On the basis of this model a regional unemployment rate equation is estimated, using data of 143 regions across 11 EU countries derived from Eurostat, 1983-1997, and national data on labour market institutions predominantly derived from the OECD.