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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))

This paper presents an outline of the so-called Shift-Share Regression and an application of this method to the analysis of employment development. The method used is not a deterministic decomposition such as the classical Shift-Share-Analysis, but a powerful, yet simple and flexible econometric tool to test theory-related hypotheses, which can be applied as a 'work-horse' in studies of many kinds. Classical deterministic Shift-Share-Analysis has often been criticised, since it does not permit a model-based analysis. The detection of causal effects is at least problematic and the inclusion of additional explanatory variables is possible only in special cases. A major problem is the nature of the method as a deterministic procedure which excludes significance tests. Shift-Share Regression is able to overcome all these critical points. In a basic version it was introduced by Patterson (1991) as a method for analysing and testing regional industrial developments. In contrary to the deterministic Shift-Share-Analysis employment development was examined in a linear model. In Patterson's analysis the industrial sector structure was used as the sole determining factor alongside the location effects and the national trend. We extend this basic structure further: In our case, the effects of sectoral structures, establishment size, qualification structures and locational determinants on employment growth are studied. The regional units used are districts of Western Germany ('Landkreise' and 'kreisfreie Städte'), especially in the present context the districts of the federal State of Bavaria. The analysis is motivated by theoretical considerations of different sources. The most important one refers to theoretical analyses of structural change. According to a specific theorem, the employment effect of technological progress depends on the elasticity of product demand. If demand is inelastic the direct labour saving effect of technological progress is dominating and the effect is negative. Then it is profitable for a firm to reduce its labour force. If, however, demand is elastic a compensating effect dominates. In this case price decreases following higher productivity lead to an extension of product demand which (over-)com¬pensates the direct labour saving effect. Then, it is profitable for a firm to increase the size of its labour force. It can be assumed that in different industries of an economy different demand elasticities are dominating. Therefore, an empirical analysis of employment effects should focus on the industries of an economy. In the paper the sources of different regional employment development in Bavaria are presented, analysed by Shift-Share Regression.

The so-called Shift-Share-Regression is used to analyse the development of employment. This does not imply a deterministic decomposition such as in classical Shift-Share-Analysis (Dunn 1960; Loveridge and Selting 1998). Instead, Shift-Share-Regression is a powerful and flexible econometric tool, which is especially suitable for testing theory-based hypotheses. In a basic version it was introduced by Patterson (1991) as a method for analysing and testing regional industrial developments. In contrary to the deterministic Shift-Share-Analysis employment development was examined in a linear model. In Patterson’s analysis the industrial sector structure was used as the sole determining factor alongside the location effects and the national trend, parallel to those of the deterministic analysis. Moller and Tassinopoulos (2000) extended Patterson’s approach by an additional variable for regional concentration. Further theory-based influences were then integrated in various IAB analyses (Blien and Wolf 2002). Some results of these studies are presented below, following an overview of the method.

This paper analyzes the performance of migrants on the German labor market and its dependence on the tasks performed on their jobs. Recent work suggests quantifying the imperfect substitutability relationship between migrants and natives as a measure for the hurdles migrants have to face. Our theoretical work adopts that migrant shares are very heterogeneous across firms which is hard to reconcile with an aggregate production function. We argue that the ability to integrate migrants may form a competitive advantage for firms. We show in a Melitz-type framework that the output reaction to wage changes varies across firms. Hence, substitution elasticities of an aggregate production function can be quite different from those individual firms are faced with. Finally we estimate elasticities of substitution for different aggregate CES-nested production functions for Germany between 1993 and 2008 using administrative data and taking into account the task approach. We find significant variation in the substitutability between migrants and natives across qualification levels and tasks. We show that especially interactive tasks seem to impose hurdles for migrants on the German labor market.

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. …

The development of employment and unemployment in regional labour markets is known to spatially interdependent. Global Vector-Autoregressive (GVAR) models generate a link between the local and the surrounding labour markets and thus might be useful when analysing and forecasting employment and unemployment even if they are non-stationary or co-trending. Furthermore, GVARs have the advantage to allow for both strong cross-sectional dependence on ``leader regions' and weak cross-sectional, spatial dependence. For the recent and further development of labour markets the economic situation (described e.g. by business-cycle indicators), politics and environmental impacts (e.g. climate) may be relevant. Information on these impacts can be integrated in addition to the joint development of employment and unemployment and the spatial link in a way that allows on the one hand to carry out economic plausibility checks easily and on the other hand to directly receive measures regarding the statistical properties and the precision of the forecasts. Then, the forecasting accuracy is demonstrated for German regional labour-market data in simulated forecasts at different horizons and for several periods. Business-cycle indicators seem to have no information regarding labour-market prediction, climate indicators little. In contrast, including information about labour-market policies and vacancies, and accounting for the lagged and contemporaneous spatial dependence can improve the forecasts relative to a simple bivariate model.

"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)

In this paper, we present a review of various computational experiments concerning neural network (NN) models developed for regional employment forecasting. NNs are nowadays widely used in several fields because of their flexible specification structure. A series of NN experiments is presented in the paper, using two data sets on German NUTS-3 districts. Individual forecasts are computed by our models for each district in order to answer the following question: How relevant are NN parameters in comparison to NN structure? Comprehensive testing of these parameters is limited in the literature. Building on different specifications of NN models-in terms of explanatory variables and NN structures-we propose a systematic choice of NN learning parameters and internal functions by means of a sensitivity analysis. Our results show that different combinations of NN parameters provide significantly varying statistical performance and forecasting power. Finally, we note that the sets of parameters chosen for a given model specification cannot be light-heartedly applied to different or more complex models. © 2010 Springer-Verlag.

In this paper we analyze the consequences of small labour-market entry cohorts on (un)employment in Western Germany. From a theoretical point of view, small entry cohorts may on the one hand reduce unemployment due to "inverse cohort crowding" or on the other hand increase unemployment if companies reduce jobs disproportionately. Empirically, several studies on cohort crowding for the USA also provide ambiguous evidence regarding the direction of the effect: labour markets may become tighter or less tight with the size of the entering cohort. The European labour market reaction on demographic changes is even less clear and the German case is especially interesting: Given the sharp decline in birth rates since the beginning of the 1970s and the relatively rigid labour market constitution, the German reaction is likely to differ from the US experience. In order to study the effect of cohort size on (un)employment, we use regional population data from the Federal Statistical Office of Germany and social security and unemployment data from the Federal Employment Agency and the IAB for the years 1978 to 2008. We account for the likely endogeneity of cohort size due to migration of the (young) workforce, using lagged birth rates as instruments. In addition, we allow for spatial autocorrelation across western German regions. Our results are good news for the (Western) German labour market: small entry cohorts are indeed likely to decrease the overall unemployment rate and thus to improve the situation of job-seekers, given the stability of the historical effect. Accordingly, the employment rate will, according to our results, increase.