Thursday, August 27, 2009

Unemployment: Culture matters more than policy

Why do some areas have higher unemployment? There are some obvious explanations, but could cultural aspects matter? For example, the social stigma attached to being unemployed could vary from a region to the other. This is very difficult to measure and typically ends up in the error term or the regional fixed effect of a regression.

Beatrix Brügger, Rafael lalive and Josef Zweimüller use data from Switzerland. There are two mains cultural groups in this country, the French and Italians speaking, called them the Latins, who have more of a Latin nonchalance and express it by not working more than necessary, and the German speaking, with a strong work ethic. (As a side-note, it is remarkable that Calvinism started in French-speaking Geneva). Of particular interest here is that the boundary between Latin and German speaking regions is well-defined, but does not overlap with political or labor market boundaries. A perfect setting to study difference in border regions using a micro dataset.

And the differences are important. For example, the duration of unemployment is 7 weeks longer in the Latin regions. This has nothing to do with discrimination, as the German speaking workers are much more likely to find a job on their ones, instead of through an employment office. And looking at those who moved from one community to the other, it appears these values are rather shared with those you live with rather than those you grew up with. Finally, the impact of these values is stronger than what policy changes would typically yield.

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