Modeling of Regional Unemployment in a Heterogeneous Country with Spatial Effects (on the Example of Italy)

The results of many studies demonstrate significant differences between the determinants of unemployment at the inter-country and at the inter-regional levels within a single country. Strong regional differences can contribute to increased social tensions. This can be a serious obstacle to effective economic growth of the state, due to the lagging of less prosperous regions and their inability in such conditions to realize their potential. The dissertation research, using the example of Italy, analyzes unemployment at the provincial level, taking into account the territorial heterogeneity of the country and without it. The key idea of incorporating heterogeneity into the model was the use of a new approach to building a spatial weight matrix, which includes various levels of spatial interaction between the provinces. Keywords: spatial econometrics, unemployment, weight matrix, heterogeneity