Classification of regional labour markets for purposes of labour market policy

In many countries regional disparities are fairly large and persistent. Often classification systems are needed to provide succinct information on these disparities. This paper presents a model-based classification system which is designed to assess labour market conditions which influence the outcomes of active labour market policy. The innovation in this paper is the development of a procedure that combines a theory-guided analysis of determinants of regional disparities with standard classification approaches. The procedure is designed to resolve two limitations inherent in many existing classification schemes: first, their purely descriptive nature and second, the lack of a theoretically meaningful organization of the variable selection process. Copyright (c) 2010 the author(s). Papers in Regional Science (c) 2010 RSAI.