AIEL Series in Labour Economics

As the cultural and political focus shifts from the nation state to sub-national (e.g. provinces and regions) and supranational aggregations (e.g. the EU), numerous theoretical and empirical studies have shown that spatial clustering heavily influences the efficiency and effectiveness of labour market policies and interventions. This can be explained by a series of local economic and institutional factors that hinder or assist the achievement of particular policy goals. The local clustering of economic activities can be a competitive advantage for an economic system, since collective wage bargaining procedures, firms' training processes, activity rate and unemployment levels (to name just a few) are affected by local customary mformal norms. The aim of the chapter is accordingly to disentangle the relationship between firms' location decisions and labour market functioning, the purpose being to evaluate how spatial variables affect the expected impact of labour policies.