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The chapter aims to explore the size and evolution of spatial inequality in Croatia and Serbia with emphasis on labour market developments. The analysis focuses on municipalities (LAU 2 level) in both countries to explore patterns of change in the labour market. We estimate spatial inequality based on the distribution of population, employment, unemployment rates, and wages. We find that regions with major cities in both countries are leading in the recovery from the recent recession, while rural areas are lagging behind. Further, there is a durable trend of both population and job concentration in the capital city area, or in urban areas generally.