The determinants of unemployment in the Swiss cantons - an empirical analysis of the differences in the cantonal unemployment rates

This article analyses the differences in the Swiss cantons' unemployment rates from 1992 to 2000. It focuses on policies and institutions of the labour markets in the cantons, especially on additional cantonal unemployment assistances and on sanctions in case of abuse of unemployment insurance. These are important elements of the cantonal labour market policies, which create diverse incentives and, thus, enduring differences on the cantonal labour markets. The analysis shows, that the cantonal labour market policies are not negligible for the explanation of the cantonal disparities in unemployment. Cantons that quite severely avenge abuses of unemployment insurance and that abstain from additional unemployment assistance have a significantly lower unemployment rate than cantons that follow a less strict unemployment policy. While cyclical factors can explain the general level of unemployment, but not the substantial cantonal differences, it is last but not least the political and institutional factors that are responsible for different cantonal responses to cyclical conditions.