Local Labor Markets: Evidence from a Spatial Job Search Model Using Large-Scale French Microdata ⋆

We extend the wage-posting model of Burdett and Mortensen (1998) to incorporate spatial dimensions and propose a novel estimation method for job mobility costs, without imposing any prior assumptions on their structure or on the local distribution of job offers. Our model introduces job mobility costs, spatial interdependence, and arbitrage between geographical areas, all within a forward-looking framework. These costs are broadly defined as factors that hinder job mobility, thereby limiting access to distant job opportunities. Identification relies on wage distributions within each geographical area and observed transition flows. We then apply our model to low-skilled workers at the employment zone level in France, leveraging a comprehensive administrative dataset (DADS), which is exploited here for the first time. Our findings highlight the critical role of geography in shaping labor market dynamics. First, the effect of geographical frictions is most pronounced within a very short radius -less than fifty kilometers (thirty miles). Second, on average, over the course of a professional career, these costs range between e70,000 and e100,000, representing 16% to 21% of reservation utility and about 10%-15% of overall job value. Third, mobility costs vary significantly across locations, from as low as e9,000 to as high as e170,000. Fourth, they increase by approximately e1,100 per kilometer of employment displacement.