Spatial Dependence in Local Unemployment Rates
Posted: 18 Jun 2008
Date Written: March 2007
By explicitly considering the spatial dimension of local regional labor markets, we develop a simple dynamic model that explains the spatial correlation between unemployment rates. We then test this model by using UK local data. Our evidence shows a significant spatial dependence that has been growing over time and characterized by a low distance decay. Highly localized effects are explained by commuting flows. These results are consistent with the theoretical model.
Keywords: unemployment, commuting flows, spatial correlation, dynamic panel data models, JEL classifications: C21, C23, J64, R12
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