Parameter Instability in Models of Local Unemployment Responses

Abstract

Following papers by Brechling and Thirlwall, a number of studies have investigated the response of local or regional unemployment series to changes in the national series by means of regression approaches. In this paper a number of statistical tests for regression instability over time are discussed, and then applied to the Brechling model of unemployment responses in thirtynine local areas in the Severnside region. The results suggest marked instability in the regression over time, and moving window regression is introduced to track changes in the values of parameters. The spatial pattern of changing unemployment responses across the region is presented and discussed.