Spatial dependence in regional unemployment in Australia

There is evidence that differentials in regional employment growth rates and regional unemployment rates have persisted in Australia since the early 1990s, despite relatively robust growth in the Australian economy overall, which might have promoted convergence in regional labour market outcomes. This paper investigates evidence of spatial dependencies in regional unemployment rates, and controlling for demand and supply effects, explores whether disparities in regional unemployment rates are partly owing to spillovers between neighbouring regions. It introduces measures of spatial association (spatial autocorrelation) and spatial econometric techniques to analyse the dependence of regional unemployment rates in the major coastal regions of New South Wales as a precursor to a wider study of the importance of local interactions and social networks in Australian regional labour market outcomes.