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How Local Are Labor Markets? Evidence from a Spatial Job Search Model

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  • Alan Manning
  • Barbara Petrongolo

Abstract

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.

Suggested Citation

  • Alan Manning & Barbara Petrongolo, 2017. "How Local Are Labor Markets? Evidence from a Spatial Job Search Model," American Economic Review, American Economic Association, vol. 107(10), pages 2877-2907, October.
  • Handle: RePEc:aea:aecrev:v:107:y:2017:i:10:p:2877-2907
    Note: DOI: 10.1257/aer.20131026
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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, May.
    2. Coles, Melvyn G & Smith, Eric, 1996. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," Economica, London School of Economics and Political Science, vol. 63(252), pages 589-597, November.
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    5. Matthew J. Notowidigdo, 2011. "The Incidence of Local Labor Demand Shocks," NBER Working Papers 17167, National Bureau of Economic Research, Inc.
    6. Stephen R. G. Jones & W. Craig Riddell, 1999. "The Measurement of Unemployment: An Empirical Approach," Econometrica, Econometric Society, vol. 67(1), pages 147-162, January.
    7. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
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    11. Leah Platt Boustan & Robert A. Margo, 2007. "Race, Segregation, and Postal Employment: New Evidence on Spatial Mismatch," NBER Working Papers 13462, National Bureau of Economic Research, Inc.
    12. Burgess, Simon & Profit, Stefan, 2001. "Externalities in the matching of workers and firms in Britain," LSE Research Online Documents on Economics 20130, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Girum Abebe & Margaret S. McMillan & Michel Serafinelli, 2018. "Foreign Direct Investment and Knowledge Diffusion in Poor Locations: Evidence from Ethiopia," NBER Working Papers 24461, National Bureau of Economic Research, Inc.
    2. Michael Amior, 2015. "Why are Higher Skilled Workers More Mobile Geographically? The Role of the Job Surplus," CEP Discussion Papers dp1338, Centre for Economic Performance, LSE.
    3. Belot, Michèle & Kircher, Philipp & Muller, Paul, 2015. "Providing Advice to Job Seekers at Low Cost: An Experimental Study on On-Line Advice," CEPR Discussion Papers 10967, C.E.P.R. Discussion Papers.
    4. José A. Azar & Ioana Marinescu & Marshall I. Steinbaum & Bledi Taska, 2018. "Concentration in US Labor Markets: Evidence From Online Vacancy Data," NBER Working Papers 24395, National Bureau of Economic Research, Inc.
    5. Andrea Morescalchi, 2016. "A new career in a new town. Job search methods and regional mobility of unemployed workers," ERSA conference papers ersa16p307, European Regional Science Association.
    6. Clémence Berson, 2016. "Local labor markets and taste-based discrimination," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-21, December.
    7. Monte, Ferdinando & Redding, Stephen J. & Rossi-Hansberg, Esteban, 2015. "Commuting, Migration and Local Employment Elasticities," CEPR Discussion Papers 10933, C.E.P.R. Discussion Papers.
    8. Lutgen, Vanessa & Van der Linden, Bruno, 2015. "Regional equilibrium unemployment theory at the age of the Internet," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 50-67.
    9. Haller, Peter & Heuermann, Daniel F., 2016. "Job search and hiring in local labor markets: Spillovers in regional matching functions," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 125-138.
    10. Jean Flemming, 2018. "Costly Commuting and the Job Ladder," 2018 Meeting Papers 100, Society for Economic Dynamics.
    11. Amior, Michael, 2015. "Why are higher skilled workers more mobile geographically?: the role of the job surplus," LSE Research Online Documents on Economics 61279, London School of Economics and Political Science, LSE Library.
    12. Axtell, Robert L. & Guerrero, Omar A. & López, Eduardo, 2016. "The Network Composition of Aggregate Unemployment," MPRA Paper 68962, University Library of Munich, Germany.
    13. Longhi, Simonetta, 2017. "Spatial-Ethnic Inequalities: The Role of Location in the Estimation of Ethnic Wage Differentials," IZA Discussion Papers 11073, Institute for the Study of Labor (IZA).
    14. Benoît Schmutz & Modibo Sidibé, 2017. "Frictional Labor Mobility," Working Papers 2017-48, Center for Research in Economics and Statistics.
    15. Dolton, Peter & Bondibene, Chiara Rosazza & Stops, Michael, 2015. "Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK," Labour Economics, Elsevier, vol. 37(C), pages 54-76.
    16. repec:eee:juecon:v:104:y:2018:i:c:p:1-15 is not listed on IDEAS
    17. Elisa Guglielminetti & Rafael Lalive & Philippe Ruh & Etienne Wasmer, 2015. "Spatial search strategies of job seekers and the role of unemployment insurance," Sciences Po publications info:hdl:2441/4n249fe9fu9, Sciences Po.

    More about this item

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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