Frictional Labor Mobility

We build a dynamic model of migrationwhere, in addition to usual mobility costs,workers face spatial frictions that decrease their ability to compete for distant job opportunities. We estimate the model on a matched employer-employee panel dataset describing labor market transitions within and between the 100 largest French cities. Our identification strategy is based on the premise that frictions affect the frequency of job transitions, while mobility costs impact the distribution of acceptedwages. We find that: (i) controlling for spatial frictions reduces mobility cost estimates by one order of magnitude; (ii) the urban wage premium is driven by better opportunities for local job-to-job transitions in larger cities; (iii) migration dramatically reduces lifetime inequalities due to initial location; (iv) labor mobility policies based on relocation subsidies are inefficient, unlike switching from nationwide to local minimum wages.