Using functional economic regions to model endogenous regional performance in Australia: implications for addressing the spatial autocorrelation problem

A new geography of functional economic regions (FERs) has been created for Australia using a methodology that optimizes within-region self-containment of commuting to jobs. The paper tests whether this FER geography might overcome the spatial autocorrelation problem encountered when using de jure regions such as local government areas (LGAs). The empirical context for the analysis is an investigation of potential factors that might explain spatial variability in the endogenous regional employment performance over the decade 1996–2006.