MATCHING UNEMPLOYMENT AND VACANCIES IN REGIONAL LABOR MARKETS: AN EMPIRICAL ANALYSIS FOR THE NETHERLANDS

ABSTRACT In this paper we analyze regional developments in unemployment and vacancies in the Netherlands during the 1980s. Our purpose is to establish to what extent the differences in unemployment and vacancy rates are due to difference in regional labor market performance. The analysis is carried out by considering labor market dynamics using the concept of the matching function. We find a constant returns to scale matching function with coefficients of 0.25 for unemployment and 0.75 for vacancies. Efficiency rises substantially during the recession in the beginning of the 1980s. Regional differences in efficiency appear to be small for most regions, suggesting that a reduction in regional unemployment should by stimulating regional labor demand.