December 2004

IZA DP No. 1439: Specialisation Patterns and the Synchronicity of Regional Employment Cycles in Europe

Ansgar H. Belke, Jens M. Heine

published in: International Economics and Economic Policy, 2006, 3 (2), 91-104

This paper examines the degree of correlation of EU regional employment cycles and attempts to show whether these cycles reflect changing patterns of specialisation. By focusing on the regional level and by employing three different indicators of similarity of sectoral structure, it improves on existing studies. A dynamic panel data model is estimated pairs of regions by within groups, i.e., by a standard fixed effects estimator. Special attention is paid to capture the rich dynamics which are typical of employment data. The key finding is that employment growth is more synchronised when regions look alike in their sectoral structure.