How Local Are Labor Markets? Evidence from a Spatial Job Search Model
This paper uses data on very small UK geographies to investigate the effective size of local labor markets. Our approach treats geographic space as continuous, as opposed to a collection of non-overlapping administrative units, thus avoiding problems of mismeasurement of local labor markets encountered in previous work. We develop a theory of job search across space that allows us to estimate a matching process with a very large number of areas. Estimates of this model show that the cost of distance is relatively high – the utility of being offered a job decays at exponential rate around 0.3 with distance (in km) to the job – so that labor markets are indeed quite 'local'. Also, workers are discouraged from applying to jobs in areas where they expect relatively strong competition from other jobseekers. The estimated model replicates fairly accurately actual commuting patterns across neighbourhoods, although it tends to underpredict the proportion of individuals who live and work in the same ward. Finally, we find that, despite the fact that labor markets are relatively 'local', local development policies are fairly ineffective in raising the local unemployment outflow, because labor markets overlap, and the associated ripple effects in applications largely dilute the impact of local stimulus across space.
|Date of creation:||Nov 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward L. Glaeser & Joshua D. Gottlieb, 2008.
"The Economics of Place-Making Policies,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
- Coles, Melvyn G & Smith, Eric, 1994.
"Cross-Section Estimation of the Matching Function: Evidence from England and Wales,"
CEPR Discussion Papers
966, C.E.P.R. Discussion Papers.
- 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 589-97, November.
- Matthew J. Notowidigdo, 2011.
"The Incidence of Local Labor Demand Shocks,"
NBER Working Papers
17167, National Bureau of Economic Research, Inc.
- 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.
- Simon Burgess & Stefan Profit, 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.
- Stephen R. G. Jones & W. Craig Riddell, 1999.
"The Measurement of Unemployment: An Empirical Approach,"
Econometric Society, vol. 67(1), pages 147-162, January.
- Stephen R. G. Jones & W. Craig Riddell, . "The Measurement Of Unemployment: An Empirical Approach," Canadian International Labour Network Working Papers 09, McMaster University.
- 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.
- Matias Busso & Jesse Gregory & Patrick Kline, 2011. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," Working Papers 11-07, Center for Economic Studies, U.S. Census Bureau.
- Matias Busso & Jesse Gregory & Patrick M. Kline, 2010. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," NBER Working Papers 16096, National Bureau of Economic Research, Inc.
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
- Eleonora Patacchini & Yves Zenou, 2007. "Spatial dependence in local unemployment rates," Journal of Economic Geography, Oxford University Press, vol. 7(2), pages 169-191, March.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6178. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.