An econometric analysis of the dispersion in the unemployment rates in the EU

Abstract

The average unemployment rate for the EU 28 countries is the lowest that it has been for a very long time. One might be tempted to say that the EU has managed to recover from some of the negative effects on unemployment that have resulted from the economic crisis and the sovereign debt crisis. Whilst countries have enjoyed significant decreases in unemployment, the EU 28 average does not show the reality faced by each country. Research shows that several countries, such as Germany and Malta, enjoy very low rates of unemployment, well below the EU 28 average. However, at the other end of the spectrum, countries such as Greece and Spain deal with very high unemployment rates, well above this average. For this reason, two main regression have been derived in order to estimate the factors which lead to differing rate of unemployment on an EU-wide level. Results have shown that factors such as GDP growth (output growth) and the growth in real labour productivity per hour worked have a significant effect on the dispersion in the unemployment rate between countries.