Working Paper: NBER ID: w29399
Authors: Moritz Kuhn; Iourii Manovskii; Xincheng Qiu
Abstract: Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities in spatial differences in unemployment, vacancies, job finding, and job filling within each country. This robust set of facts guides and disciplines the development of a theory of local labor market performance. We find that a spatial version of a Diamond-Mortensen-Pissarides model with endogenous separations and on-the-job search quantitatively accounts for all the documented empirical regularities. The model also quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle.
Keywords: Labor Market; Unemployment; Job Creation; Job Destruction
JEL Codes: E24; E32; J63; J64; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| job separation rates (J63) | unemployment rates (J64) |
| job finding rates (J68) | unemployment rates (J64) |
| lower unemployment rates (J68) | tighter labor markets (J49) |
| tighter labor markets (J49) | speed of job filling (J68) |
| higher productivity (O49) | lower separation rates (J63) |
| higher productivity (O49) | higher job finding rates (J68) |
| lower separation rates (J63) | lower unemployment rates (J68) |
| higher job finding rates (J68) | lower unemployment rates (J68) |