REGIONAL LABOR-MARKET DYNAMICS IN EUROPE

The paper investigates regional labor market dynamics in Europe and co mpares the results to those obtained for the US. It analyzes to what e xtent regional employment dynamics are common to all regions in Europe and to all states in the US. It finds that a larger proportion of mov ements in employment growth is common to all US states than to all EEC regions. Next, the paper studies the adjustment mechanisms that a typ ical region-specific shock triggers. It shows that for Europe, in the first three years, most of the shock is absorbed by changes in the par ticipation rate while, in the US, it is immediately reflected in migra tion. Surprisingly, in both cases, the unemployment rate plays a small role suggesting the presence of natural unemployment rates at the reg ional level.