Unemployment rates differ widely across local labor markets. I offer new empirical evidence that high local unemployment emerges because of elevated local job-losing rates. Local employers, rather than local workers or location-specific factors, account for most of the spatial gaps in job stability. I propose a theory in which spatial differences in job loss emerge in equilibrium because of systematic differences between employers across local labor markets. The spatial sorting decisions of employers in turn shape heterogeneity across locations. Labor market frictions induce productive employers to overvalue locating close to each other. The optimal policy incentivizes them to relocate toward areas with high job-losing rates, providing a rationale for commonly used place-based policies. I estimate the model using French administrative data. The estimated model accounts for over three-quarters of the cross-sectional dispersion in unemployment rates and for the respective contributions of job-losing and job-finding rates. Inefficient location choices by employers amplify spatial unemployment differentials fivefold. Both real-world and optimal place-based policies can yield sizable local and aggregate welfare gains.

The location of individuals determines their job and schooling opportunities, amenities, and housing costs. We conceptualize the location choice of individuals as a decision to invest in a “location asset.” This asset has a current cost equal to the location's rent, and a future payoff through better job and schooling opportunities. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with high future returns. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. Holdings of the location asset depend on its comparison to other assets, with the distinction that the location asset is not subject to borrowing constraints. We propose a dynamic location model and derive an agent's mobility choices after experiencing income shocks. We document the investment dimension of location and confirm the core predictions of our theory using French individual panel data from tax returns.

This article estimates that the macroeconomic damages from climate change are an order of magnitude larger than previously thought. Exploiting natural global temperature variability, we find that 1ºC warming reduces world GDP by over 20% in the long run. Global temperature correlates strongly with extreme climatic events, unlike country-level temperature used in previous work, explaining our larger estimate. We use this evidence to estimate damage functions in a neoclassical growth model. Business-as-usual warming implies a present welfare loss of more than 30%, and a social cost of carbon in excess of $1,200 per ton. These impacts suggest that unilateral decarbonization policy is cost-effective for large countries such as the United States.

This paper integrates the classic theory of firm boundaries, through span of control or taste for variety, into a model of the labor market with random matching and on‐the‐job search. Firms choose when to enter and exit, whether to create vacancies or destroy jobs in response to shocks, and Bertrand‐compete to hire and retain workers. Tractability is obtained by proving that, under a parsimonious set of assumptions, all worker and firm decisions are characterized by their joint surplus, which in turn only depends on firm productivity and size. The job ladder in marginal surplus that emerges in equilibrium determines net poaching patterns by firm characteristics that are in line with the data. As frictions vanish, the model converges to a standard competitive model of firm dynamics. The combination of firm dynamics and search frictions allows the model to: (i) quantify the misallocation cost of frictions; (ii) replicate elusive life‐cycle growth profiles of superstar firms; and (iii) make sense of the failure of the job ladder around the Great Recession as a result of the collapse of firm entry.