Working Paper: CEPR ID: DP1364
Authors: Michael C. Burda; Stefan Profit
Abstract: The increase in dispersion of regional unemployment in the Czech Republic, despite low overall joblessness, is suggestive of low labour mobility. At the same time, standard matching functions estimated with district level panel data exhibit spatial instability. A simple model of non-sequential search with endogenous search intensity can link this instability to spatial interdependence in matching, inducing complex functional forms and non-constant returns to scale. We find a statistically significant non-uniform impact of surrounding districts on local matching, even after controlling for boundaries and sectoral heterogeneity. Constant returns for this modified matching function cannot, however, be rejected in most cases.
Keywords: regional mobility; matching function; spatial interactions; Czech Republic
JEL Codes: J41; J61; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| regional unemployment dispersion (J60) | labor mobility (J62) |
| surrounding districts (Y80) | local matching (C78) |
| interdistrict distances (R12) | empirical correlations of residuals from standard matching function (C29) |
| unemployment in one district (J68) | job finding rate in another district (J68) |