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Journal of Economic Geography Advance Access originally published online on February 15, 2007
Journal of Economic Geography 2007 7(2):169-191; doi:10.1093/jeg/lbm001
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Right arrow C21 - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Spatial dependence in local unemployment rates

Eleonora Patacchini* and Yves Zenou{dagger}

*Università di Roma "La Sapienza".

{dagger}Corresponding author: Research Institute of Industrial Economics, Box 55665, 102 15 Stockholm, Sweden, and GAINS. email < yves.zenou{at}riie.se>

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
Date submitted: 23 March 2006     Date accepted: 16 January 2007


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