Explaining Differences in Unemployment between British Travel to Work Areas: The Role of Public Sector Employment and Other Influences

Abstract

There are large spatial differences in unemployment rates in Great Britain. This article attempts to explain variations in rates between travel to work areas (TTWAs) and focuses particularly on the contribution of public spending to that explanation. Our hypothesis is that higher public or quasi-public spending in the key areas of national government, local government, hospitals and higher education, especially during periods of recession, is negatively related to unemployment in those TTWAs owing to the aggregate demand aspect of such expenditure. It is concluded that public spending does seem to ameliorate the level of unemployment and that other possible determinants of unemployment (representing aspects of both aggregate supply and demand) at the local level are county unemployment, the percentage of employment in traditional industry, a proxy variable for wealth and earnings.