Occupational Coherence and the Geography of Unemployment

Why do labor markets in some regions perform better than in others? This paper studies how the occupational coherence of local labor markets shapes regional unemployment dynamics. Using matched employer-employee data for France, we develop a network of inter-occupational relatedness based on worker mobility. By mapping local occupational structures onto this occupation space, we derive a measure of occupational coherence for 304 commuting zones in France. Occupational coherence captures the ease with which workers can switch jobs locally. Using a shift-share instrument that exploits exogenous trade shocks to other developed countries, we find that local labor markets with higher occupational coherence experience significantly lower unemployment. This effect operates mainly through within-firm reallocation: workers in more coherent labor markets are more likely to adjust by moving internally to other occupations. Our findings highlight the importance of occupational structure for local labor market performance and suggest that policies fostering occupational mobility can help reduce local unemployment rates.