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The Nonutilisation of Human Capital in Regional Labour Markets across Europe

Author

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  • J P Elhorst

    (Faculty of Economics, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands)

Abstract
In this paper the author investigates the extent to which regional Europe exceeds its minimum level of nonemployment by estimating a stochastic frontier model. This surplus is called the ‘inefficiency of regional labour markets’—the degree to which potential labour-force resources among the nonparticipants could be further mobilised given the actual unemployment rate. Starting with 130 regions across eight member states of the European Union, two nonemployment frontier models are estimated, one for men and one for women, with annual data derived from Eurostat, 1983–89. It turns out that, on average, 1.9% of the male and 4.8% of the female working-age population could be further mobilised, and that, consequently, the actual unemployment rate is underestimated by 2.8% overall. In addition, a test has been performed as to whether the inefficiency estimates are related to participation, employment, or unemployment figures. It appears that unemployment figures in particular are extremely bad predictors.

Suggested Citation

  • J P Elhorst, 1998. "The Nonutilisation of Human Capital in Regional Labour Markets across Europe," Environment and Planning A, , vol. 30(5), pages 901-920, May.
    • Handle: RePEc:sae:envira:v:30:y:1998:i:5:p:901-920
    DOI: 10.1068/a300901
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    References listed on IDEAS

    as
    1. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    2. J. Paul Elhorst, 1996. "A Regional Analysis of Labour Force Participation Rates across the Member States of the European Union," Regional Studies, Taylor & Francis Journals, vol. 30(5), pages 455-465.
    3. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
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    1. repec:dgr:rugsom:00c06 is not listed on IDEAS
    2. Elhorst, J. Paul, 2000. "The Mystery Of Regional Unemployment Differentialsa Survey Of Theoretical And Empirical Explanations," ERSA conference papers ersa00p60, European Regional Science Association.
    3. J. Paul Elhorst, 2003. "The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 709-748, December.
    4. Philip S. Morrison, 2005. "Unemployment and Urban Labour Markets," Urban Studies, Urban Studies Journal Limited, vol. 42(12), pages 2261-2288, November.

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