Discussion Paper Details

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Title: The Geography of Job Creation and Job Destruction

Author(s): Moritz Kuhn, Iourii Manovskii and Xincheng Qiu

Publication Date: October 2021

Keyword(s): Local Labor Markets, Search and Matching, unemployment and Vacancies

Programme Area(s): Labour Economics, Macroeconomics and Growth, Monetary Economics and Fluctuations and Public Economics

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.

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Bibliographic Reference

Kuhn, M, Manovskii, I and Qiu, X. 2021. 'The Geography of Job Creation and Job Destruction'. London, Centre for Economic Policy Research.