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"We forecast unemployment for the 176 German labour-market districts on a monthly basis. Because of their small size, strong spatial interdependencies exist between these regional units. To account for these as well as for the heterogeneity in the regional development over time, we apply different versions of an univariate spatial GVAR model. When comparing the forecast precision with univariate time-series methods, we find that the spatial model does indeed perform better or at least as well. Hence, the GVAR model provides an alternative or complementary approach to commonly used methods in regional forecasting which do not consider regional interdependencies." (Author's abstract, IAB-Doku) ((en))

BACKGROUNDGermany, like many OECD countries, faces a shift in the age composition of its population, and will face an even more drastic demographic change in the years ahead. From a theoretical point of view, decreasing cohort sizes may on the one hand reduce unemployment due to inverse cohort crowding or, on the other hand, increase unemployment if companies reduce jobs disproportionately. Consequently, the actual effect of cohort shrinkage on employment and unemployment is an empirical question.OBJECTIVEWe quantitatively assess the relationship between (un)employment and cohort sizes.METHODSWe analyze a long panel of population and labor-market data for Western German labor market regions. We isolate the direct, statistical effect of aging in a decomposition approach and estimate the overall effect by regression. In this context, we account for the likely endogeneity of cohort size due to migration of the young workforce across regions using lagged births as instrument.RESULTSThe direct effect of the age composition of the labor force on unemployment is negligible. In contrast, the elasticities of unemployment and employment with regard to the labor-market entry cohort's size are significantly positive or negative, respectively. The causal effect indicates an over-elastic reaction by unemployment.CONCLUSIONSOur results provide good news for the Western German labor market: small entry cohorts are indeed likely to decrease the overall unemployment rate and thus to improve the situation of job seekers. Accordingly, we find the employment rate is positively affected by a decrease in the youth proportion.(ProQuest: ... denotes formulae omitted.)1 IntroductionIn this paper we analyze the consequences of labor market entry cohort size on employ- ment and unemployment in Western Germany. Germany experienced a sharp decline in birth rates in the second half of the 1960s when the so-called "baby boom" was followed by a "baby bust". As a result, the youth proportion, i.e. the population aged 15-24, di- vided by the population aged 15-64, has dropped significantly 15 years later. In the late 1970s, this youth share was around 23% in Germany but 26% in the U.S. and even 32% in Canada (OECD average: 24%). Due to an increasing birth deficit and the aging of the baby boomer, Germany is today - together with Japan - among those industrialized coun- tries that display the lowest youth proportion among OECD member states (Germany: 17%, OECD average: 19%). Paralleling demographic development, unemployment rates have been decreasing, whereas participation rates have been increasing over the last few years in Germany.Based on these stylized facts, we analyze whether or not the size of the labor mar- ket entry cohort has affected unemployment and employment rates in Western Germany. From a theoretical perspective, the effects of cohort size changes on the labor market are unclear, as the juxtaposition of the cohort crowding hypothesis and the hypothesis of Shimer (2001) shows. With regard to the cohort crowding hypothesis, Easterlin (1961) argues that workers do not perform as well in the labor market if they belong to bigger co- horts. The reason is that labor demand is supposed to react less flexibly than labor supply. In contrast to this rationale, Shimer (2001) points out that companies have an incentive to create more jobs in regions with large youth entry cohorts, which eventually overcompen- sates the increase in the labor supply. In addition to these theoretical discrepancies, even empirical investigations provide ambiguous results (e.g. Korenman and Neumark 2000; Skans 2005; Foote 2007). It is at this point that our analysis adds to the existing literature. We study the impact of shrinking cohort sizes on (un)employment over a long time span, i.e. from 1978 to 2009, consider functional regional labor markets as an appropriate unit of analysis and apply various econometric robustness checks. …

"Die geographische Verteilung und die Persistenz (das Beharrungsvermögen von Schocks) von regionalen bzw. lokalen Arbeitslosenquoten in heterogenen Volkswirtschaften (wie bspw. Deutschland) war in den vergangenen Jahren Gegenstand zahlreicher theoretischer und empirischer Studien. Besonderer Augenmerk lag auf den dynamischen Anpassungsprozessen der Arbeitslosigkeit und am durchschnittlichen Grad der Abhängigkeit der gegenwärtigen Arbeitslosigkeit (alternativ auch des GDP) von ihrer Verteilung in der Vergangenheit. Hier präsentieren wir einen neuen ökonometrischen Ansatz zur Analyse der Persistenz der Arbeitslosigkeit, welcher der regionalen Heterogenität und der räumlichen Autokorrelation in den Niveaus und der Dynamik Rechnung trägt. Zunächst diskutieren wir die Verwendung eines räumlichen Filters als Substitut für Fixe Effekte in einem Panel-Schätzansatz. Der räumliche Filter dient als Proxy für regionsspezifische Information (z.B. bzgl. der Ausstattung an natürlichen Ressourcen oder bzgl. der Größe des Marktes im Einzugsgebiet), die üblicherweise in fixen Effekten aufgefangen werden; analoges gilt für die Filtermodellierung der heterogenen Dynamik. Das vorgestellte Verfahren bietet den Vorteil, dass der räumliche Filter -durch parameter-sparsames Auffangen der Information, die räumliche Korrelation erzeugt- die Zahl der Freiheitsgrade erhöht, gleichzeitig auf zeitkonstante räumliche Korrelation in den Residuen kontrolliert und Einsicht gibt in die räumlichen Muster der regionalen Anpassungsprozesse. Es werden verschiedene Untersuchungen bzgl. der regionalen Muster in den heterogenen autoregressiven Parametern dargestellt, die mit Arbeitslosigkeitsdaten für die deutschen Kreise geschätzt werden. In der regionalen Arbeitslosigkeit finden wir einen allgemein hohen, dennoch recht heterogenen Grad an Persistenz." (Autorenreferat) "The geographical distribution and persistence of regional/local unemployment rates in heterogeneous economies (such as Germany) have been, in recent years, the subject of various theoretical and empirical studies. Several researchers have shown an interest in analysing the dynamic adjustment processes of unemployment and the average degree of dependence of the current unemployment rates or gross domestic product from the ones observed in the past. In this paper, we present a new econometric approach to the study of regional unemployment persistence, in order to account for spatial heterogeneity and/or spatial autocorrelation in both the levels and the dynamics of unemployment. First, we propose an econometric procedure suggesting the use of spatial filtering techniques as a substitute for fixed effects in a panel estimation framework. The spatial filter computed here is a proxy for spatially distributed region-specific information (e.g., the endowment of natural resources, or the size of the "home market") that is usually incorporated in the fixed effects parameters. The same argument applies for the spatial filter modelling of the heterogenous dynamics. The advantages of our proposed procedure are that the spatial filter, by incorporating region-specific information that generates spatial autocorrelation, frees up degrees of freedom, simultaneously corrects for time-stable spatial autocorrelation in the residuals, and provides insights about the spatial patterns in regional adjustment processes. We present several experiments in order to investigate the spatial pattern of the heterogeneous autoregressive parameters estimated for unemployment data for German NUTS-3 regions. We find widely heterogeneous but generally high persistence in regional unemployment rates." (author's abstract)

The geographical distribution and persistence of regional/local unemployment rates in heterogeneous economies (such as Germany) have been, in recent years, the subject of various theoretical and empirical studies. Several researchers have shown an interest in analysing the dynamic adjustment processes of unemployment and the average degree of dependence of the current unemployment rates or gross domestic product from the ones observed in the past. In this paper, we present a new econometric approach to the study of regional unemployment persistence, in order to account for spatial heterogeneity and/or spatial autocorrelation in both the levels and the dynamics of unemployment. First, we propose an econometric procedure suggesting the use of spatial filtering techniques as a substitute for fixed effects in a panel estimation framework. The spatial filter computed here is a proxy for spatially distributed region-specific information (e.g., the endowment of natural resources, or the size of the ‘home market’) that is usually incorporated in the fixed effects parameters. The advantages of our proposed procedure are that the spatial filter, by incorporating region-specific information that generates spatial autocorrelation, frees up degrees of freedom, simultaneously corrects for time-stable spatial autocorrelation in the residuals, and provides insights about the spatial patterns in regional adjustment processes.We present several experiments in order to investigate the spatial pattern of the heterogeneous autoregressive parameters estimated for unemployment data for German NUTS-3 regions. We find widely heterogeneous but generally high persistence in regional unemployment rates.