DP3722 Search Intensity, Cost of Living and Local Labour Markets in Britain

Author(s): Eleonora Patacchini, Yves Zenou
Publication Date: January 2003
Keyword(s): dynamic panel data, GMM estimation, job matching, measurement errors, search intensities, spatial correlation
JEL(s): C23, D83, J64, R10
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3722

A model is considered in which optimal search intensity is a result of a trade-off between short-run losses due to higher search costs (more interviews, commuting...) and long-run gains due to a higher chance to find a job. We show that this optimal search intensity is higher in areas characterized by larger cost of living and/or higher labour market tightness. We then test this model using county-level data in England for the period 1991-2000. As predicted by the theoretical model, both the county cost of living and the county labour market tightness are found to have a positive and significant effect on the county search intensity. We also find positive spatial correlation between counties (i.e. clustering of counties with similar level of search intensity) and strong spatial spillover effects.