Disentangling the causes behind regional employment differences in Sweden : The case of regional job losses within two sectors of the Manufacturing Industry

Abstract: The purpose of this thesis is to disentangle the causes behind differences in regional employment across the 81 Swedish LA regions. Thus, two questions will be answered; which factors causes regional disparity in employment and which where the least and the most affected regions during the economic crises of the 1990’s? The answer to these questions are imposed by certain chosen restrictions, where only the situation within two manufacturing industries will be investigated; the car- and machine manufacturing sectors. Previous research claim that there are specific factors that influence and creates regional growth disparity. Among these factors can be found; education, infrastructure, demography, industry diversity and migration. Statistical data then enables a division of the regions on basis of the change in employment level within the manufacturing industries as a share of total employment. It is revealed that the most affected regions during an economic shock are those areas that have the highest employment ratio within these manufacturing sectors. The empirical findings indicates that in the case of Swedish manufacturing industries especially three factors influence the employment level; population, education and migration. Additionally, distance to a larger city is proven to be significant during recessions while being insignificant during economic booms. The last factor, diversity, on the other hand indicates that the correlation is the reverse. Hence, diversity has an impact during economic upswings, while this is not the case during downturns. With the development during the 90’s as a reference, the same method is used to locate today’s most vulnerable industrial regions. Statistics show that Ljungby is at the top of this list. When studying the strategic development plan for this region it is found that this area follows a policy in line with those variables that this thesis has pin-pointed to be beneficial for regional growth. Hence, this region has taken beneficial policy steps in order to decrease the dependency on a vulnerable and market sensitive industrial sector.