Employment in Spanish regions

After the Great Financial Crisis, regional disparities in Spanish unemployment remain. Since generic labour market reforms have been fruitless on their attenuation, we explore whether Spanish regions react differently to key drivers of employment and wage setting. We find that low income regions are more reactive to a growth strategy based on estimulating investment, while the high income ones are more sensitive to a strategy that keeps unit labour costs low. Our results call for more region-specific policies and discard standard labour market reforms as a unique tool to manage the unemployment rate problem