American Economic Review Vol. 107 No. 10 2017

How Local Are Labor Markets? Evidence from a Spatial Job Search Model

Alan Manning¹; Barbara Petrongolo²

¹ Centre for Economic Performance, London School of Economics, Houghton Street, London WC2A 2AE (email: ) · ² Centre for Economic Performance, London School of Economics, and School of Economics and Finance, Queen Mary University, Mile End Road, London E1 4NS (email: )

Abstract

This paper models the optimal search strategies of the unemployed across space to characterize local labor markets. Our methodology allows for linkages between numerous areas, while preserving tractability. We estimate that labor markets are quite local, as the attractiveness of jobs to applicants sharply decays with distance. Also, workers are discouraged from searching in areas with strong competition from other job-seekers. However, as labor markets overlap, a local stimulus or transport improvements have modest effects on local outcomes, because ripple effects in job applications dilute their impact across a series of overlapping markets.

DOI

10.1257/aer.20131026

Volume

107

Issue

10

Pages

2877-2907

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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