Hysteresis of regional unemployment: the case of Greece and Spain

The substantial increase in the unemployment rate after the crisis in the year 2008, its persistence and slow gradual decreasing in European countries is the reason that makes us think about if the theory of hysteresis is applicable to European labour markets. The main objective of this work is to verify the hypothesis of hysteresis in labour markets at regional level in Greece and Spain. The unit root tests were used on the time series of unemployment rate between 2001-2015 for Greek regions and 2002-2016 for the Spanish regions. The result is that the theory of hysteresis in unemployment is applicable on all the regions in both countries. When the data series of employment are used, the results are different. In Greece only Crete and in Spain regions Andalusia, Balearic Islands, Canary Islands, Kastilie la Mancha, Catalonia, Valencia, Murcia and Ceuta exhibit the hysteresis in employment. There are also differences between rates of men and women in Spanish regions. When unemployment rates are considered, only three region have different results. But when employments rates are used most of women's time series can't be described as non-stationary in contrast of those of the men's.