How Local Are Labor Markets? Evidence from a Spatial Job Search Model
This paper models the optimal search strategies of the unemployed across space to characterize local labor markets. Our methodology allows for linkages between numerous areas, while preserving tractability. We estimate that labor markets are quite local, as the attractiveness of jobs to applicants sharply decays with distance. Also, workers are discouraged from searching in areas with strong competition from other job-seekers. However, as labor markets overlap, a local stimulus or transport improvements have modest effects on local outcomes, because ripple effects in job applications dilute their impact across a series of overlapping markets.
1 October 2017
American Economic Review 107(10) , pp.2877-2907, 2017
This Journal article is published under the centre's Labour markets programme.
This publication comes under the following theme: Unemployment and job search