Integrated Analysis of Regional and National Unemployment Differentials in the European Union

Regional Studies. This study investigates the causes of variation in regional unemployment rates from a cross-country perspective. In the proposed, stylized theoretical framework, both regional- and national-level variables serve as explanatory variables. An econometric model of random and fixed coefficients of regional and national variables acknowledges that observations may be correlated in space and time and that some explanatory variables are not strictly exogenous. Using annual data pertaining to 142 regions across ten European Union countries during 1983-1997, it was found that regional and national variables are almost equally important and that unemployment cannot be addressed with a common policy.