Labour Market Areas Research Articles

Handling Out‐of‐Sample Areas to Estimate the Unemployment Rate at Local Labour Market Areas in Italy

SummaryUnemployment rate estimates for small areas are used to efficiently support the distribution of services and the allocation of resources, grants and funding. A Fay–Herriot type model is the most used tool to obtain these estimates. Under this approach out‐of‐sample areas require some synthetic estimates. As the geographical context is extremely important for analysing local economies, in this paper, we allow for area random effects to be spatially correlated. The spatial model parameters are estimated by a marginal likelihood method and are used to predict in‐sample as well as out‐of‐sample areas. Extensive simulation experiments are used to assess the impact of the auto‐regression parameter and of the rate of out‐of‐sample areas on the performance of this approach. The paper concludes with an illustrative application on real data from the Italian Labour Force Survey in which the estimation of the unemployment rate in each Local Labour Market Area is addressed.

Agglomeration and the Italian North–South divide

Abstract This article offers new evidence on agglomeration economies by examining the link between total factor productivity (TFP) and employment density in Italy. We investigate whether and how the TFP–density nexus contributes to explaining a relevant share of the marked productivity gap between the northern and the southern Italian regions. We estimate TFP for a large sample of manufacturing firms and then aggregate it at the level of local labour market areas. We tackle the endogeneity issues stemming from the presence of omitted covariates and reverse causation with an innovative set of diagnostic tests and an instrumental variable approach that relies on geological and historical data. Our estimate of the TFP elasticity to the spatial concentration of economic activities is about 0.045, a magnitude comparable to those measured for other developed countries. We also show that no significant heterogeneity emerges in the intensity of agglomeration economies across the country and that the positive TFP difference in favour of the firms located in the North is not due to the tougher competition taking place in those areas.

Rural–Urban Features of Social Innovation: An Exploratory Study of Work Integration Social Enterprises in Ireland

Geography is a significant element of social innovation. This paper focuses on exploring differences and similarities in the characteristics and contributions towards impact of Work Integration Social Enterprises (WISEs), a form of social innovation which provides otherwise unmet services and opportunities to people at risk of social and economic exclusion and distant from the labour market, in rural and urban areas of Ireland. To do so, we use data from 336 surveys from urban (213) and rural (123) WISEs and conduct an exploratory and spatially sensitive analysis to compare the characteristics, in terms of organisational age, legal and governance form, multiplicity of activities, revenue diversification; and contributions towards impact, in terms of geographical focus/reach, employment, volunteers, and income generation. Our analysis shows that WISEs in urban and rural areas present rather similar organisational characteristics and ways of functioning (legal structure, multiactivity, multiple sources of funding), but their contributions to socioeconomic impact differ according to their spatial location, with urban WISEs generating significantly more employment and income than their rural counterparts. Our study illustrates that socially innovative organisations are spatially sensitive, and that context influences their capacity to create sustainable employment opportunities and contribute to the local economy.

Regional structural change in Argentina (1996–2019): Concepts, measurements and unequal trajectories over the business cycle

Although multiple studies on structural change can be found at the national level, the definition of structural change is far from univocal and its subnational manifestations remain underexplored. This paper empirically examines the patterns of regional structural change in Argentina according to the four main definitions used in the literature (not only productive diversification, predominant in the economic geography field), highlighting the differences that arise when applying these concepts. Based on employment data for 85 labor market areas (LMAs) throughout the 1996–2019 period, we propose different criteria to apply and measure the four definitions and to classify the heterogeneous trajectories of structural change in LMAs, including cluster analysis. As the business cycle is a critical dimension in such an unstable economy, we examine the entire period and compare two sub-periods with very different economic dynamics. The results show that the identification of structural change depends on the concepts and measures used, the unit of analysis (national versus regional) and the type of economic cycle. These findings call for context- and place-based policies.

Migration and natives' inequality: Evidence from Italian local labor markets

AbstractUsing individual data from the Italian Labor Force Survey, we investigate the impact of immigration on the Gini index and the percentile ratio (p90/p10) at the household level within Labor Market Areas (LMAs) in Italy from 2008 to 2018. To identify the effect of immigration we construct a composite index based on demographic and occupation‐related characteristics that captures the degree of similarity between immigrants and natives across LMAs. This approach addresses the limitations of the standard cell segmentation method and allows us to estimate the impact of immigration on the entire distribution of natives' earnings. To address endogeneity concerns we use an instrument proposed by Card, which exploits the tendency of immigrants to migrate to areas with a pre‐existing group of immigrants of the same ethnicity. Our findings show that immigration reduces income inequality among natives and the effect is larger in those LMAs where the degree of similarity between immigrants and natives is higher. We also find that immigration has a positive effect on natives' labor income in occupations that require language skills, while the effect is not significant in low/no skilled jobs that only require basic language skills, or highly skilled jobs where interaction between immigrants and natives is limited.

Temporality in the delimitation of functional regions: the use of mobile phone location data

ABSTRACT This paper evaluates the role of ‘temporality’ in defining functional regions. Functional regions are viewed as relatively closed in terms of selected population flows (or more generally concerning spatial interactions). They are usually defined by the daily commuting to work and are therefore commonly referred to as local labour market areas or travel-to-work areas. Using mobile phone location data, however, it is possible to work with population flows in a broader temporal and spatial context. Then we can talk about the temporality alternatives of functional regions depending on whether we base them on regular daily population flows, irregular daily population flows (which, according to the data analysis, are irregular from an individual’s point of view but regular from a spatial unit’s point of view between which they take place) or weekend population flows. Thus, several functional region’s versions can be defined for a single regional system, where the different population movement’s rhythm lengths movements limit their length and also determine their hierarchy. All functional regions’ temporal alternatives according to mobile phone location data are defined based on data from the Czech Republic.

Inner areas matter: A place-sensitive approach for the identification of the Daily Life Spaces in the Italian Abruzzo region

Despite the institutionalization of the issue of inner areas with the National Strategy for Inner Areas (Strategia Nazionale per le Aree Interne, SNAI), a reflection on their spatial organisation is still missing. Our paper aims at filling this gap by providing a methodology for identifying the citizens' Daily Life Spaces (DLS) in the Italian Abruzzo region, which can be used as the spatial unit of analysis of cohesion policies. Their identification results from a multi-step algorithm based on an original definition of central places and on the notions of geographical and organised proximity which consider both citizens’ isochrones and commuting flows. Our methodology is able to provide the internal spatial organisation of both Labour Market Areas and Project Areas and is consistent with a historical perspective. Finally, it questions the SNAI classification, calling for a revision of its methodology of identification.

Population grid and location quotient of land cover to capture the urban-rural nature of labour market areas in Italy

Population grid and location quotient of land cover to capture the urban-rural nature of labour market areas in Italy

It’s not me, it’s you: internal migration and local wages in Great Britain

ABSTRACT Differences in regional incomes are large and persistent in many countries. On the one hand, internal migration from low- to high-income regions might eradicate these differences over time. On the other hand, internal migration might exacerbate disparities, as receiving regions benefit from incoming skills and agglomeration economies. This paper estimates the effect of internal in- and out-migration on the earnings of employees who do not move, using a panel of employee records from Great Britain between 2004 and 2018. Employees are tracked and identified as internal migrants if they start working in a new travel-to-work area (TTWA), representing functional labour market areas. The share of in- and out-migrants is significantly correlated with earnings and earnings growth of non-migrants in a TTWA. The results show that in-migrants have an immediate negative effect on local earnings of non-migrants. After three years, in-migration is positively correlated with earnings growth. These effects are exclusively driven by urban areas. Out-migrants have no significant effects. The results provide some evidence that labour mobility can be used as a tool to encourage local growth, albeit with significant adjustment costs.

The Use of Spatial Information in Area-level Models: An Evaluation Based on Auxiliary Data Availability

The small area estimation (SAE) theory is widely used when local or domain-specific reliable estimates based on survey data are needed. Small area model-based estimates use a model that links the response variable to some auxiliary information borrowing strength from the related areas. When geographical information on the areas of interest is available, the specification of a spatial area level model can increase the estimates’ efficiency, depending on available auxiliary data. In this article, we first review the most popular area level spatial models, and we then compare their performance under two alternative scenarios of auxiliary information availability to estimate the average equivalized household income in Italian Local Labour Market Areas (LLMAs) using the EU-SILC (European Union Statistics on Income and Living Conditions) survey data. Our findings suggest that the spatial information can “fill the gap” when the covariates do not have a high predictive power, a crucial result when there is lack of auxiliary data. AMS Subject Classification: 62D05, 62G05, 62H11

Classification of regions according to the dominant innovation barriers: The characteristics and stability of region types in Germany

AbstractLagging regions differ in their characteristics, implying a need for tailor‐made policy measures to improve the economic situation in these regions. However, while there are differences between these regions, certain types of regions might exist that share the same obstacles to innovations, allowing for taking similar political measures. This paper examines whether such types of regions can be identified in Germany, what characteristics they possess, and how they change. For this purpose, regional characteristics that are related to innovation barriers are identified and operationalized. Then, a cluster analysis is conducted for the German labor market area. While the identified types of regions are in some way or another also discussed in the literature, the paper provides for the first time a classification within one empirical framework and allows for the study of the dynamics of the types of regions as well as the dynamics within each region inside this framework. The correspondence with the existing knowledge about German regions confirms that it is possible to do such a classification using quantitative data. Furthermore, the stability of the types of regions confirms that such a classification can be considered a good basis for policy measures. The results also depict trends that might lead to problems in the future and require policy attention.

Job Search, Spatial Constraints, and Unemployment Duration: An Empirical Analysis of the Cameroonian Case

The individual transition from unemployment to employment is conditioned by various elements. If some of them concern directly the individual characteristics of workers, while others implicate indeed their environment when searching for a job. The residential location, housing status, and high travel distances to each labor market area are factors that can influence the exit rate of unemployment. This paper aims to integrate, in a job search model with endogenous intensity, the spatial horizon of prospecting. This horizon is introduced through the prospecting distance, which influences both the arrival rate of offers and the search costs. The equilibrium properties of the model lead to an indeterminate effect of the prospecting distance on the unemployment duration. The micro econometric estimation of the structural model allows us to deal with this ambiguity. The method adopted takes into account not only the selection rule on access to employment but also the endogeneity of the choice of spatial mobility. Results highlight that the exit from unemployment is shorter as the prospecting distance increases, but the increase in this prospecting distance does not lead to a decrease in the reserve wage.

Urban agglomeration, city size, and spatial density effects on wage flexibility: New evidence on the wage curve in Brazil

AbstractThis study aims to shed new empirical light on the importance of the wage curve in a developing economy. The main contribution to the empirical literature is related to the analysis being conducted at different regional levels of a developing economy. This indicates that municipal‐level data seems to be more adequate for wage curve evaluation, and that spatial dependency should be considered to adequately control for local labor market characteristics. Results for Brazil show that wage flexibility is higher in less dense local labor markets and in the informal sector. Controlling for unobserved local characteristics is necessary to obtain the ‘true’ elasticity of wages with respect to local unemployment rates, while spatial autocorrelation effects should be accounted for when the spatial unit of analysis is rather small to consider the interactions that happen inside a specific labor market area. Finally, a significant part of the difference in outcomes between formal and informal sectors appears to originate from spatial–economic dependence effects, indicating that labor market areas are more suitable for such analysis.

The local labour market effects of earthquakes

ABSTRACT Using a balanced panel of local labour market areas (LLMAs) and adopting a new difference-in-differences approach with multiple time periods and multiple groups, this paper assesses the causal effects on local labour market outcomes of the earthquakes that occurred in Italy in 2009, 2012 and 2016. The results show a strong heterogeneity: the 2009 event had significant negative and persistent impacts on the employment rate of the LLMAs involved, while there were no adverse effects for the LLMAs affected by the earthquakes in 2012 and 2016. We also extend the analysis at the industry level in order to highlight the sectoral shifts that typically characterise the aftermath of these natural disasters.

Men are Always Better? How Swedish Municipalities Justify Pay Differences in Gender Pay Audit Reports

ABSTRACT This study analyses how pay inequality among Swedish municipal employers is justified in their mandatory pay audit reports. Critical discourse analysis was used to examine the overarching message that there are no unjust salary differences between women and men, since the differences found have justifiable explanations. Normative critique for reproducing gender salary gaps can be addressed to the reports, since salary differences between individual men and women doing similar work were justified by reference to men’s experience or special tasks and the organizational policy of individual salaries. Salary differences between groups of men and women were explained by men’s experience and their special and demanding tasks. Market explanations for salary differences were frequently used as a justification of men’s higher salaries. The normative critique can be supplemented by an explanatory critique, as overarching societal discourses, such as employers being held responsible for gender pay gaps in the labour market and technical areas having more value than care areas were identified in the texts. We argue that through pay audit reports inequality regimes in regard to pay are discursively reproduced.

Assessment of Excess Mortality in Italy in 2020–2021 as a Function of Selected Macro-Factors

Excess mortality (EM) can reliably capture the impact of a pandemic, this study aims at assessing the numerous factors associated with EM during the COVID-19 pandemic in Italy. Mortality records (ISTAT 2015-2021) aggregated in the 610 Italian Labour Market Areas (LMAs) were used to obtain the EM P-scores to associate EM with socioeconomic variables. A two-step analysis was implemented: (1) Functional representation of EM and clustering. (2) Distinct functional regression by cluster. The LMAs are divided into four clusters: 1 low EM; 2 moderate EM; 3 high EM; and 4 high EM-first wave. Low-Income showed a negative association with EM clusters 1 and 4. Population density and percentage of over 70 did not seem to affect EM significantly. Bed availability positively associates with EM during the first wave. The employment rate positively associates with EM during the first two waves, becoming negatively associated when the vaccination campaign began. The clustering shows diverse behaviours by geography and time, the impact of socioeconomic characteristics, and local governments and health services' responses. The LMAs allow to draw a clear picture of local characteristics associated with the spread of the virus. The employment rate trend confirmed that essential workers were at risk, especially during the first wave.

What Can District Migration Rates Tell Us about London’s Functional Urban Area?

In the early 1990s, Anthony Fielding coined the term ‘escalator region’ to describe how London and the South East attracted those with greater human capital by offering them superior career prospects and enhanced returns in the housing markets. When delineating a housing or labour market area, it is not uncommon to require high levels of migration and commuting within the market area relative to those that cross the area’s boundaries. Net migration flows to and from this escalator region change depending on the age range one examines, making migration across boundaries relatively high. It is proposed that focusing on age ranges that reflect younger adults would capture the extent of the market. In particular, the birth of a first child is likely to trigger migration, but that movement is constrained to be within the boundary of the market area. The decision to buy a dwelling would be made around the time of this event. This paper delineates market areas using spatial autocorrelation. This has the advantage of using a statistical criterion rather than a containment value. Broadly similar areas in the Greater South East are revealed using relative housing affordability measures, the movement of infants and the migration of 20- to 24-year-olds. It is argued that the time-varying patterns of migration of 30- to 39-year-olds is reflective of a change in housing affordability, forcing more households to migrate with children whilst renting.

Is the Global Competitiveness Index by the World Economic Forum a reliable tool for the design of labor market policies? Evidence from Latin American countries

Abstract Most of the competitiveness gap in Latin America is due to its labor market, one of the areas with the highest rates of subjective indicators in the Global Competitiveness Index (GCI). This paper analyzes the subjective component of the GCI in the labor market area and discusses its accuracy for policy advice. We focus on the set of countries that highly rely on the GCI for policy advice and highlight that the perception of business executives of the labor market as rigid contrasts with the significant experience of flexibilization policies undertaken in the region over the past 3 decades. We show that the GCI has been largely constructed with opinion data from large firms, a business sector that accounts for <5% of total firms in the countries of study. Furthermore, the questionnaire exhibits obvious flaws. Thus, we do not find that the GCI provides a solid base for policy advice.

Robots and the productivity of local manufacturing systems in Emilia-Romagna: the mediating role of occupational similarity and complexity

ABSTRACT During the last decade, a growing literature has been assessing the impact of industrial robots on productivity and employment. At the local level, the labour-displacing effect of robot adoption can be counterbalanced by a task reallocation between manufacturing industries characterized by similar/related occupational spaces. This reallocation process can be also influenced by the average degree of occupational complexity of the local labour markets. To test for the mediating role of similarity and complexity in the robot-employment-productivity relationship, we develop a two-step analysis mixing information from different data sources on 15 industries and 39 local labour market areas of the Emilia-Romagna region in Italy, for the period 2008–2017. Our analysis shows that higher exposure to robots does not affect the aggregate level of labour productivity, but, rather, is associated with a decline in (high routine) employment after three years. We further show that the negative relationship between robots and employment decreases, or even vanishes, in local labour markets with high cross-industry occupational similarity and low occupational or task complexity, and within industrial districts.

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

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.