EU regional unemployment as a transnational matter : an analysis via the Gompertz diffusion process

At the end of 1990s, Danny Quah devoted several papers to the analysis of polarization and stratification in the convergence processes of economies, creating the image of the \u2018convergence clubs\u2019 and suggesting the importance of studying the distribution dynamics of the macroeconomic variables. As for the labour markets, Overman and Puga (2002) showed that a progressive polarization of unemployment was in fact occurring among the European regions in 1986\u20131996, causing a phenomenon of cross-border clusterization. Here we propose to analyse the evolution of the unemployment rates of the EU 27 regions in the last two decades assuming that the unemployment rates evolve according to a Gompertz stochastic process. The estimated parameters of the process \u2013 intrinsic growth rate, deceleration factor, volatility \u2013 represent the evolutionary path of the unemployment rate and allow for estimating the steady state of the process. A cluster analysis is performed on the steady state values of the unemployment rates. The analysis confirms the emergence of several \u2018convergence clubs\u2019 among the European regional labour markets, which are compared to the clusters resulting from the more traditional clusterization on the current unemployment rate