Unemployment clusters across European regions and countries

Abstract

European regions have experienced a polarisation of their unemployment rates between 1986 and 1996, as regions with intermediate rates have been driven by changes in regional employment, only partly offset by labour force changes. Regions'' outcomes have closely followed those of neighbouring regions. This is only weakly explained by regions being part og the same member state, having a similar skill composition, or broad sectoral specialisation. Even more surpriisingly , foreign neighbours matter as much as domestic neighbours. All of this suggests a reorganisation of economic activities withh increasing disregard for national borders.