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How local are labor markets: evidence from a spatial job search model
This paper models the optimal search strategies of the unemployed to characterize local labor markets. Our methodology allows for linkages between numerous areas, while preserving tractability. We estimate that labor markets are indeed ‘local’, as the attractiveness of jobs to applicants sharply decays with distance. Also, workers are discouraged from searching in areas with strong job competition from other jobseekers. As labor markets overlap, local stimulus has modest effects on local outcomes, because ripple effects in job applications dilute its impact across space. Hiring subsidies for the locals are instead more effective, because they improve locals’ chances in the competition for jobs.
Barbara Petrongolo is Professor of Economics at Queen Mary University and Research Associate at the Centre for Economic Performance of the London School of Economics, as well as Research Fellow of CEPR and IZA. She has previously held positions at the London School of Economics, the Paris School of Economics and the University of Carlos III (Madrid). Her main area of interest is applied labour economics. The focus of some of her recent contributions is the performance of labour markets with job search frictions, with applications to unemployment dynamics, welfare policy and interdependencies across local labour markets. She has also carried out research on the causes and characteristics of gender inequalities in wages and employment rates, in a historical perspective and across countries, with emphasis on the role of employment selection mechanisms, structural transformation, and interactions within the household.
Fondazione Bruno Kessler - Via Santa Croce 77 - Trento