Unemployment and sectoral competitiveness in Southern European Union countries. Facts and policy implications

    Gina Cristina Dimian Affiliation
    ; Mirela Ionela Aceleanu Affiliation
    ; Bogdan Vasile Ileanu Affiliation
    ; Andreea Claudia Șerban Affiliation


This article addresses the problem of the main factors driving sectoral unemployment in the Mediterranean countries most affected by this phenomenon. The choice of the four countries (Greece, Italy, Spain and Portugal) relies on the fact that they are dealing with the highest unemployment rates in the European Union and a certain typology of the economic structure. The originality of our research is offered by its direction, less tackled until now, namely the focus on the particularities of the economic sectors, trying to capture differences between them. The importance and the impact of the results are supported by the methods used to produce them, indicators and econometric models that are on trend and bring extra information to available studies. Descriptive statistics and mismatch indexes are used to outline the economic and labour market structure, while the econometric models built on panel data capture the impact of factors such as GVA growth, specialization and labour market mismatches on the unemployment rate at six economic sectors level. Our paper makes three contributions to the literature. First, we have demonstrated that agriculture is the sector of activity less sensitive to output fluctuations in terms of unemployment and can become a buffer for the jobless in times of recessions. Second, we have proved that industry, as a whole, is highly responsive to economic developments and bad specialization could worsen unemployment situation in this sector. Third, we showed that educational mismatches have a significant impact on unemployment in those sectors of activity that employ low educated workforce.

Keyword : unemployment, GVA growth, mismatches, economic sectors, panel data analysis, Okun’s law

How to Cite
Dimian, G. C., Aceleanu, M. I., Ileanu, B. V., & Șerban, A. C. (2018). Unemployment and sectoral competitiveness in Southern European Union countries. Facts and policy implications. Journal of Business Economics and Management, 19(3), 474-499.
Published in Issue
Nov 19, 2018
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Apergis, N., & Rezitis, A. (2003). An examination of Okun’s law: evidence from regional areas in Greece. Applied Economics, 35(10), 1147-1151.

Azorin, J. D. B., & De la Vega, M. D. S. (2017). Output growth thresholds for the creation of employment and the reduction of unemployment: a spatial analysis with panel data from the Spanish provinces, 2000–2011. Regional Science and Urban Economics, 67(C), 42-49.

Bolat, S., Tiwari, A. K., & Erdayi, A. U. (2014). Unemployment hysteresis in the Eurozone area: evidences from nonlinear heterogeneous panel unit root test. Applied Economics Letters, 21, 536-540.

Busetta, G., & Corso, D. (2012). Labor productivity and Okun’s law: an empirical application to Italian region panel date. Rivista Italiana degli Economisti, 2(2), 279-298.

Camarero, M., Carrion-i-Silvestre, J. L., & Tamarit, C. (2006). Testing for hysteresis in unemployment in OECD countries: new evidence using stationarity panel tests with breaks. Oxford Bulletin of Economics and Statistics, 68(2), 167-182.

Canon, M. E., Chen, M., & Marifian, E. A. (2013). Labour mismatch in the great recession: a review of indexes using recent U.S. data. Federal Reserve Bank of St. Louis Review, 95(3), 237-271.

Carrion-i-Silvestre, J. L., del Barrio, T., & López, E. (2002). Breaking the panels. An application to the GDP per capita, AQR Research Group. Department of Econometrics, Statistics and Spanish Economy. University of Barcelona. Retrieved from

Cheng, S. C., Wu, T., & Chang, T. (2014). Flexible Fourier unit root test of unemployment for PIIGS countries. Economic Modelling, 36, 142-148.

Choi, I. (2015). Almost all about unit roots foundations, developments and applications. Cambridge University Press.

Christopoulos, D. K. (2004). The relationship between output and unemployment: evidence from Greek regions. Papers in Regional Science, 83(3), 611-620.

COMM. (2013). Labour market developments in Europe 2013, European Economy 6/2013. European Commission, Brussels, Belgium.

Dritsaki, C., & Dritsakis, N. (2009). Okun’s coefficient for Four Mediterranean Member Countries of EU: An Empirical Study. International Journal of Business and Management, 4(5), 18-26.

Di Pietro, G., & Urwin, P. (2006). Education and skills mismatch in the Italian graduate labour market. Applied Economics, 38(1), 79-93.

Dickey, P. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time-series with a unit root. Journal of the American Statistical Association, 74(366), 427-431.

Dinu, M., Marinas, M. C., Socol, C., & Socol, A. G. (2011). Testing the Okun’s law in Romania. Economic Computation and Economic Cybernetics Studies and Research, 1, 5-21.

Eichhorst, W., & Neder, F. (2014). Youth unemployment in Mediterranean Countries. IZA Policy Paper No 80. Retrieved from

Eliott, G., Rothenberg, T., & Stock, J. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64(4), 813-836.

Enders, W., & Lee, J. (2012). The flexible Fourier form and the Dickey-Fuller type unit root tests. Econ Letters, 117(1), 196-199.

European Central Bank (ECB). (2004). Sectoral specialization in the EU. A Macroeconomic Perspective, Occasional Paper Series, No.19/July 2004. Retrieved from

Eurostat. (2018). Official statistics of European Union. Retrieved from

Ezcurra, R. (2011). Unempoyment volatility and regional specialization in the European Union. Regional Studies, 45(8), 1121-1137.

Furceri, D., & Mourougane, A. (2012). How do institutions affect structural unemployment in times of crises? Panoeconomicus, 4, 393-419.

Furuoka, F. (2014). Are unemployment rates stationary in Asia-Pacific countries? New findings from Fourier ADF test. Economic Research, 27, 34-45.

Furuoka, F. (2017). A new approach to testing unemployment hysteresis. Empirical Economics, 53, 1253-1280.

Gabrisch, H., & Bruscher, H. (2006). The relationship between unemployment and output in Postcommunist countries. Post-Communist Economies, 18(3), 261-276.

Garcia-Cintado, A., Romero-Avila, D., & Usabiaga, C. (2015). Can the hysteresis hypothesis in Spanish regional unemployment be beaten? New evidence from unit root tests with breaks. Economic Modelling, 47, 244-252.

Garibaldi, P., & Taddei, F. (2013). Italy: A dual labour market in transition, ILO, Employment Sector. Employment Working Paper No. 144.

Garonna, P., & Sica, F. G. M. (2000). Intersectoral labour reallocations and unemployment in Italy. Labour Economics, 7(6), 711-728.

Ghita, S.I., Saseanu, A.S., Gogonea, R.M., & Huidumac-Petrescu, C.E. (2018). Perspectives of ecological footprint in European context under the impact of information society and sustainable development. Sustainability, 10(9), 3224.

Hadri, K. (2000). Testing for unit roots in heterogeneous panel data. Econometrics Journal, 3, 148-161.

Hall, C. (2016). Does more general education reduce the risk of future unemployment? Evidence from an expansion of vocational upper secondary education. Economics of Education Review, 52, 251-271.

Harvey, D. I., Leybourne, S. J., & Taylor, A. M. R. (2013). Testing for unit roots in the possible presence of multiple trend breaks using minimum Dickey-Fuller statistics. Journal of Econometrics, 177, 265-284.

Holden, S., & Sparrman, V. (2017). Do government purchases affect unemployment?. Scandinavian Journal of Economics, 120(1), 124-158.

Hooper, V. (2017). Okun’s law revisited within the context of high eurozone unemployment: a note. E-Journal of International and Comparative Labour Studies, 6(2), 156-159.

Huang, H. C., & Yeh, C. C. (2013). Okun’s law in panels of countries and states. Applied Economics, 45(2), 191-199.

ILO. (2014a). Greece: productive jobs for Greece. International Labour Organization, Research Department, Geneva.

ILO. (2014b). Spain. Growth with jobs. International Labour Organization, Research Department, Geneva.

ILO. (2014c). Portugal. Tackling the jobs crisis in Portugal. International Labour Organization, Research Department, Geneva.

Im, K. S., & Lee, J. (2001). Panel LM unit root tests with level shifts. Department of Economics, University of Central Florida, Orlando. Retrieved from

Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115, 53-74.

Im, K. S., Pesaran, M. H., & Shin, Y. (1997). Testing for unit roots in heterogeneous panels. Department of Applied Economics, University of Cambridge.

Johansen, K. (2002). Hysteresis in unemployment: evidence from Norwegian counties. Working Paper series No.6/2002, Department of Economics, Norwegian University of Science and Technology.

Kao, C. D. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics, 90, 1-44.

Karfakis, C., Katrakilidis, K., & Tsanana, E. (2014). Does output predict unemployment? A look at Okun’s law in Greece. International Labour Review, 153, 421-433.

Khraief, N., Shahbaz, M., Heshmati, A., & Azam, M. (2015). Are unemployment rates in OECD countries stationary? Evidence from univariate and panel unit root tests. Discussion Paper 9571. Retrieved from

Li, J. P., Ranjbar, O., & Chang, T. (2017). Unemployment hysteresis in PIIGS countries: a ney test with both sharp and smooth breaks. The Singapore Economic Review, 62(05), 1165-1177.

Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61, 631-652.

Maria, J. R. (2016). Output and unemployment Portugal, 2008-2012. Working Papers 2016, Banco de Portugal, Lisbon. Retrieved from

Matuzeviciute, K., Butkus, M., & Karaliute, A. (2017). Do technological innovations affect unemployment? Some empirical evidence from European countries. Economies, 5(4), article number 48.

Mitra, D., & Ranjan, P. (2010). Offshoring and unemployment: the role of search frictions labor mobility. Journal of International Economics, 81(2), 219-229.

Mongelli, F. P., Dorrucci, E., Ioannou, D., & Terzi, A. (2015). Responses to the Euro area crisis: measuring the path of European Institutional Integration. Journal of European Integration, 37(7), 769-786.

Narayan, P. K., & Popp, S. (2010). A new unit root test with two structural breaks in level and slope at un-known time. Journal of Applied Statistics, 37, 1425-1438.

OECD Statistics. (2018). Retrieved from

Ortego-Marti, V. (2017). Difference in skill loss during unemployment across industries and occupations. Economics Letters, 161, 31-33.

Paciello, M. C. (2010). The impact of the economic crisis on Euro-Mediterranean relations. The International Spectator, Italian Journal of International Affairs, 45(3), 51-69.

Patrizia, O., & Giuseppe, R. (2015). Educational mismatch and unemployment scarring. International Journal of Manpower, 36(5), 733-753.

Pedroni, P. (2004). Panel cointegration; asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20, 597-625.

Perron, P., & Vogelsang, T. J. (1992). Nonsationarity and level shifts with an application to purchasing power parity. Journal of Business and Economic Statistics, 10, 301-320.

Perman, R., Gaetan, S., & Tavera, C. (2013). Okun’s law – a meta analysis. SIRE Discussion Paper 2013-59. Scottish Institute for Research in Economics. Retrieved from

Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modeling approach to cointegration analysis. In S. Strom, A. Holly, & P. Diamond (Eds.). Centennial Volume of Rangar Frisch, Cambridge University Press, Cambridge. Retrieved from

Phelps, E. S. (1998). Structural slumps – the modern theory of unemployment, interest and assets. Cambridge, MA: Harvard University Press.

Rios, V. (2016). What drives unemployment disparities in European regions? A dynamic spatial panel approach. Regional Studies, 11, 1-13.

Tatoglu, Y. F. (2011). The long and short run effects between unemployment and economic growth in Europe. Doğuş University Journal, 12(1), 99-113.

Turner, P. (2010). Power properties of the CUSUM and CUSUMSQ tests for parameter instability. Applied Economics Letters, 17(11), 1049-1053.

Suciu, M. C., & Florea, C. A. (2017). An empirical study on the migration among young skilled and creative people. Amfiteatrul Economic, 19(46), 727-741.

Syssoyeva-Masson, I., & Andrade, J. (2017). Are PIIGS so Different? An empirical analysis of demand and supply shocks. Panoeconomicus, Special Issue, 64(2), 189-222.

Van Ours, J. C. (2015). The Great Recession was not so great. Labour Economics, 34(C), 1-12.

Villaverde, J., & Maza, A. (2007). Okun’s law in the Spanish regions. Economics Bulletin, 18(5), 1-11.

Villaverde, J., & Maza, A. (2009). The robustness of Okun’s law in Spain, 1980–2004: regional evidence. Journal of Policy Modelling, 31(2), 289-297.

Vogelsang, T., & Perron, P. (1998). Additional tests for a unit root allowing for a break in the trend function at an unknown time. International Economic Review, 39(4), 1073-1100.

Zanin, L. (2018). The pyramid of Okun’s coefficient for Italy. Empirica, 45(1), 17-28.

Zhang, J. (2017). Unemployment benefits and matching efficiency in an estimated DSGE model with labor market search frictions. Macroeconomics Dynamics, 21(8), 2033-2069.