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An econometric decision model for equalizing regional unemployment in West and East Germany
[working paper]
Corporate Editor
Wirtschafts- und Sozialwissenschaftliches Institut in der Hans-Böckler-Stiftung
Abstract "Reducing disparities among regions within European countries is the aim of European and
national structural policies. In particular, a European grant contributes to the German
governmental program for equalizing regional unemployment. The goal is to bring it down
to the national average by creating... view more
"Reducing disparities among regions within European countries is the aim of European and
national structural policies. In particular, a European grant contributes to the German
governmental program for equalizing regional unemployment. The goal is to bring it down
to the national average by creating new and/or by safeguarding existing jobs.
In the given paper the distribution of available aid among 271 German labor market
regions is considered as an econometric decision problem. At first, the dependence of the
unemployment rate on the amount of aid is estimated for each eligible region. Using this
dependence, the variance of regional unemployment rates is expressed as a function of the
regional subsidies. The optimal aid distribution among regions is obtained by minimizing
this variance subject to the total budget constraint and administrative restrictions.
The optimal figures computed are compared with statistical data for 2000-2002. They
show that the regional unemployment in West Germany could be equalized better (with
variance 3.50 against the actual 4.40) and with a simultaneous decrease in the average
unemployment in West Germany from 7.45 to 7.28%. In East Germany all regions are
eligible, implying no administrative constraints and a high optimization flexibility. It
enables almost perfectly equalize regional indices down to the variance 0.28 against the
actual 9.76. Under the model assumptions, the actual results of the equalizing policy could be
attained by half the budget granted. These underused possibilities explain the low efficiency of active labor market policies reported in empirical studies. To improve their
performance, some tools for optimally distributing subsidies and predicting their effects
are suggested." (author's abstract)... view less
Keywords
EU; subsidy; old federal states; European Commission; Federal Republic of Germany; statistics; regional distribution; labor market policy; quota; New Federal States; unemployment; European Structural Funds; labor market; Europe
Classification
European Politics
Labor Market Research
Labor Market Policy
Economic Policy
Method
empirical
Document language
English
Publication Year
2003
City
Düsseldorf
Page/Pages
54 p.
Series
WSI-Diskussionspapier, 115
Licence
Deposit Licence - No Redistribution, No Modifications
Data providerThis metadata entry was indexed by the Special Subject Collection Social Sciences, USB Cologne