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Thick-market effects and churning in the labor market: evidence from U.S. cities

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Hoyt Bleakley
Jeffrey Lin

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Abstract

Using U.S. Census microdata, the authors show that, on average, workers change occupation and industry less in more densely populated areas. The result is robust to standard demographic controls, as well as to including aggregate measures of human capital and sectoral mix. Analysis of the displaced worker surveys shows that this effect is present in cases of involuntary separation as well. On the other hand, the authors actually find the opposite result (higher rates of occupational and industrial switching) for the subsample of younger workers. These results provide evidence in favor of increasing-returns-to-scale matching in labor markets. Results from a back-of-the-envelope calibration suggest that this mechanism has an important role in raising both wages and returns to experience in denser areas.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 07-23.

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Date of creation: 2007
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Handle: RePEc:fip:fedpwp:07-23

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Keywords: Labor market;

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  1. Daniel F. Heuermann, 2009. "Career Networks and Job Matching - Evidence on the Microeconomic Foundations of Human Capital Externalities," Discussion Papers 200901, Institute of Labour Law and Industrial Relations in the European Community (IAAEG). [Downloadable!]
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