<p>Industrialization trends have been densely analyzed at cross-country level with strong evidence that industrialization favors economic development. Despite its importance, evidence on the sub-national analysis of industrialization is relatively rare. Moreover, impact of regional heterogeneity and spatial externalities are most of the time neglected. In this study, we examine the impact of industrialization on local unemployment in a developing country, Turkey. Our results from fixed effect models show that manufacturing production is negatively linked to regional unemployment even after controlling for various local conditions. These results are robust to inclusion of spatial externalities allowing for inter-regional spillover. Moreover, our empirical setup controls for potential endogeneity issues and confirms that manufacturing specialization matters for the distribution of unemployment. Our additional results also show that the strong effect of industrialization is beyond the regional differences in labor market-based and economic differences. Finally, manufacturing specialization tends to have less gender equalizer effect as it favors more the male population. Overall, these findings highlight the importance manufacturing production for local labor markets and also underline the need for policy action to enhance the effectiveness of industrialization to decrease the unemployment problem across different groups of the population.</p>