The role of education in regional labour markets: Evidence from two fragile economies

Abstract

This chapter aims to describe regional disparities in the labour market performance of two southern EU countries, Greece and Spain, during the period covering the economic boom and the recession caused by the international financial crisis at the end of the last decade. The crisis hit these two economies with particular virulence due to their macroeconomic imbalances and the weaknesses of their economic structures. This resulted in adjustments in employment and wages in regions that were among the most dynamic during the booming period. An important factor in processes of adjustment, and in the determination of equilibrium outcomes with regard to wages and unemployment more generally, has to do with the human capital endowment available to each regional economy. Thus, this chapter also provides evidence of the effect of the individuals’ level of education on unemployment and wages in each region. The hypothesis is that the regional distribution of individuals’ education would be a key driver of disparities in labour market outcomes and in regional responses to the crisis, and that the impact that education has on unemployment and wages varies depending on the region.