Functional Regions for Policy: a Statistical ‘Toolbox’ Providing Evidence for Decisions between Alternative Geographies

Abstract

Labour market areas and other functional regions (FRs) are increasingly used within research and policy, but how FRs are best defined is an unresolved issue. This is important because the policy impacts, or the research results, will differ depending on the specific FR boundaries used. As a result of this sensitivity (termed the Modifiable Areal Unit Problem), quantitative metrics are needed so that differing sets of FR boundaries can be evaluated. To meet this need the paper firstly reviews the concept and use of labour market areas – the form of FRs most widely used in policy – to identify relevant criteria for evaluating any regionalisation comprising a set of FRs. Next a range of potential measurable indicators for each of the criteria is defined. These candidate indicators are then exemplified by applying them to a huge number of alternative sets of FRs. From this empirical evidence a short-list of preferred indicators is identified, creating a statistical ‘toolbox’ for evaluating sets of FRs. The paper ends by first sketching possible processes within which applying the indicators can help policy-makers with a decision over the appropriate set of FRs for a specific policy, before finally outlining some potential future research developments.