Testing Transferability: Quantitative Evaluation of Labor Market Area Definition Methods in Three Contrasting Countries

Abstract

Sub‐national economic policies increasingly use labor market areas (LMAs) rather than administrative areas for analysis and implementation. How a set of LMAs was defined influences the results of such analyses, and so accurate policy delivery needs appropriately defined LMAs. Multinational bodies need comparable LMA definitions in many countries, calling for a definition method that is transferable across national boundaries. This article applies quantitative metrics to evaluate LMAs defined in three contrasting countries by three methods that represent the main methodological approaches. The deductive approach—based on a center and hinterland—is too inflexible to deal with differing geographical circumstances and cannot cope with statistical zones that are very small, or do not respect settlement structure. The alternative inductive methods tested define appropriate LMAs in each country, with the newer method performing slightly better in statistical terms. The article also exemplifies the usefulness of the metrics for comparisons of alternative regionalizations.