A min-cut approach to functional regionalization, with a case study of the Italian local labour market areas

In several economical, statistical and geographical applications, a territory must be subdivided into functional regions. Such regions are not fixed and politically delimited, but should be identified by analyzing the interactions among all its constituent localities. This is a very delicate and important task, that often turns out to be computationally difficult. In this work we propose an innovative approach to this problem based on the solution of minimum cut problems over an undirected graph called here transitions graph. The proposed procedure guarantees that the obtained regions satisfy all the statistical conditions required when considering this type of problems. Results on real‐world instances show the effectiveness of the proposed approach.