Scale effects in markets with search

Reduced- form tests of scale effects in markets with search, run when aggregate matching functions are estimated, may miss important scale effects at the micro level, because of the reactions of job searchers. A semi-structural model is developed and estimated on a British sample, testing for scale effects on the offer arrival rate and the wage offer distribution. When contrasting London with the rest of the country we find scale effects in wage offers. But the larger market delivers higher realized wages and not more matches, because the scale effects on matches are offset by the response of reservation wages

Minimum Wage and Compliance in a Model of Search On-the-Job

minimum wages, compliance, job search, wage growth

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

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 job competition from other jobseekers. 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

Compensation for Commuting in Imperfect Urban Markets

We develop an urban equilibrium job search model with employed and unemployed individuals where residential mobility of the unemployed is restricted. We assume a standard mono-centric model (firms are located in one location), but allow for imperfect labour markets. In contrast to models with perfect labour markets, the model predicts that the employed are only partially compensated for commuting costs in the form of wages. As a result, rent gradients are less steep than predicted by standard urban theories that assume perfectly competitive labour markets. © 2007 the author(s). Journal compilation © 2007 RSAI