Does population density matter in the matching process of heterogeneous job seekers and vacancies?
This paper analyses the matching process of job seekers and vacant jobs in local labour markets. We investigate how the education level of job seekers and education requirements of vacancies match together in the areas of Local Labour Offices (LLOs), and what is the role of population density in that process. The data set is temporally, spatially, by education level of job seekers and by education requirements of vacancies highly disaggregated monthly data from 146 LLOs in Finland over 14 years. We find differences in the abilities of local labour markets to form successful matches at given levels of inputs. These differences can be explained partly by population density. We control for the heterogeneity of both sides of the labour market in our models allowing different employability for job seekers with different education levels and different filling rates for vacancies with different education requirements. Our results suggest that education increases successful matches only in markets with certain characteristics.
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