ABSTRACT
This chapter examines the evidence for the existence of area externalities by considering the problem of unemployment in a severely deprived housing estate in the West of Scotland. It considers in general terms the factors generating differences in unemployment rates within urban areas. Next, the chapter discusses the existing empirical evidence on the relative importance of individual and area factors. It gives a statistical analysis of unemployed individuals from the deprived Ferguslie Park estate and a control group drawn from the adjoining urban area. The chapter discusses the implications of findings for labour market policies towards deprived areas. Unemployment is not distributed randomly across the population. Particular sets of individuals are more likely to experience unemployment than others. It is known that specific neighbourhoods within given labour market areas are characterised by exceptionally high unemployment rates relative to the area average.
