Explaining the pattern of regional unemployment: The case of the Midi-Pyrenees region

Unemployment rates vary widely at the sub-regional level. We seek to explain why such variation occurs, using data for 174 districts in the Midi-Pyrenees region of France for 1990-1991. A set of explanatory variables is derived from theory and the voluminous literature. The best model includes a correction for spatially autocorrelated errors. Unemployment rates are higher in urban areas and, where per capita income is higher, are consistent with the view that unemployment differences largely reflect variations in "amenities." Along with a lack of evidence of housing market rigidities, these suggest that subregional variations in unemployment are not mainly the result of labor market disequilibrium.