Does Space Matter for Labour Markets and How? A Critical Survey of the Recent Italian Empirical Evidence

This paper aims to analyse the relationships between firms’ location decisions and local labour markets functioning in a spatial economics perspective. In this way we are able to show that spatial factors are crucial to the design and implementation of labour policies since firms’ and employees’ decisions depend on a set of socio-economic elements deriving from clustering dynamics and inter-industry interactions. In the paper we organise the existing literature on local labour markets by distinguishing two main approaches: on the one hand are studies on ‘travel to work areas’ and other functional partitions of the territory identified in light of the commuting behaviour of workers and the functional specialisation of firms (as in the classical tradition of Italian industrial districts). On the other hand are studies which take for granted the standard division of sub-national units of land and either measure a series of indicators of labour market performance or examine the effects of centripetal and centrifugal forces of firms’ location on local employment and wages. In conclusion, the paper demonstrates the existence of a strict causality relation between a given analytical framework and the consequent economic policy instruments implemented by the public authority.