The persistence of regional disparities in labor markets: Evidence from Puerto Rico

Puerto Rico, a US territory, has historically shown a high unemployment rate and one of the world's lowest labor participation rates, which suggests the presence of permanent disparities relative to the US. In this study, by accounting for the differences across the regional labor markets in Puerto Rico, we analyze whether the disparities between regional unemployment, employment, and labor force rates with either the US counterpart or the national counterpart are permanent. Using quarterly data from 1990:Q2 to 2019:Q4, univariate and panel unit root tests indicate that permanent disparities are present in the regional labor markets relative to the US and the national counterparts. However, relative to the latter, the processes are break stationary for some regions. Specifically, the evidence suggests that the unemployment disparities of the west area, the employment disparities of the south area, and the labor force disparities of the south and north areas are permanent.