How do Dutch regional labour markets adjust to demand shocks?

This paper analyses the response of regional labour markets in The Netherlands to region specific labour demand shocks. Whereas previous studies analyse only average patterns of all regions in a country, this paper provides also a more in debt analysis of within country differences in labour market adjustment processes. Previous studies show remarkable differences in response between regions in European countries and regions in the United States. The analysis in the present paper shows that in Dutch regions the labour market adjusts to labour demand shocks primarily through changes in participation. In that sense it fits the European picture. As far as the speed of adjustment to a shock is concerned, the Dutch labour market seems more in line with American than with European levels. A spatial disaggregated analysis shows remarkable differences between regions within the Netherlands. In particular the response of the regions in the northern part of the country stands out. First, adjustment to a shock is absorbed much faster than in other Dutch regions. Second, the shock is absorbed more through changes in unemployment than changes in participation.