Spatial dependence of regional unemployment in the European Union

The findings of recent studies on adjustment processes suggest that regional labour markets in the EU and the US differ significantly. Low wage flexibility and limited labour mobility in European countries involve persistent unemployment differentials across regions. However, the spatial dimension of regional labour market problems is largely neglected in the corresponding analyses. In contrast, the present paper focuses on the spatial structure of regional unemployment disparities. Regions are tightly linked by migration, commuting and interregional trade. These types of spatial interaction are exposed to frictional effects of distance, possibly causing spatial dependence of regional labour market conditions. Spatial association of regional unemployment is analysed for a sample of European countries between 1986 and 1998 by measures of spatial autocorrelation and spatial econometric methods. The results point to a significant spatial dependence among regional labour markets in Europe. Regions marked by high unemployment as well as areas characterised by low unemployment tend to cluster in space. The findings suggest that different forms of spatial interaction with varying scope affect the evolution of regional unemployment in Europe.