Learning by searching: Spatial mismatches and imperfect information in Southern labor markets
Abhijit Banerjee and
Sandra Sequeira
Journal of Development Economics, 2023, vol. 164, issue C
Abstract:
Youth unemployment remains extremely high throughout the developing world, at times coexisting with unmet demand for labour and high job turnover. We examine one possible explanation for this: spatial mismatches between jobs and job-seekers combined with high search costs can lead young job-seekers to have overly optimistic beliefs about their employment prospects. As a result, job-seekers under-search but also hold out for better jobs. Through a field experiment we find that reducing search costs through transport subsidies leads job-seekers to search more intensively and to adjust their beliefs in line with their search experience. When jobs fail to materialize immediately, job-seekers who believed that dropping CVs at prospective employers in the city centre was an effective search strategy become more impatient, they lower their reservation wage and they settle for low-paying jobs closer to home. This does not increase their likelihood of being employed, since nearby jobs are also scarce. These findings underscore both the importance and the complexity of the interaction between search costs and beliefs, and how they can lead to spatial and occupational mistargeting in the job search.
Keywords: Labour markets; Transport costs; Search costs; Transport subsidies (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387823000664
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Learning by searching: spatial mismatches and imperfect information in Southern labor markets (2023) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:164:y:2023:i:c:s0304387823000664
DOI: 10.1016/j.jdeveco.2023.103111
Access Statistics for this article
Journal of Development Economics is currently edited by M. R. Rosenzweig
More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().