The Geography of Unemployment

Adrien Bilal

The Quarterly Journal of Economics, 2023, vol. 138, issue 3, 1507-1576

Abstract: Unemployment rates differ widely across local labor markets. I offer new empirical evidence that high local unemployment emerges because of elevated local job-losing rates. Local employers, rather than local workers or location-specific factors, account for most of the spatial gaps in job stability. I propose a theory in which spatial differences in job loss emerge in equilibrium because of systematic differences between employers across local labor markets. The spatial sorting decisions of employers in turn shape heterogeneity across locations. Labor market frictions induce productive employers to overvalue locating close to each other. The optimal policy incentivizes them to relocate toward areas with high job-losing rates, providing a rationale for commonly used place-based policies. I estimate the model using French administrative data. The estimated model accounts for over three-quarters of the cross-sectional dispersion in unemployment rates and for the respective contributions of job-losing and job-finding rates. Inefficient location choices by employers amplify spatial unemployment differentials fivefold. Both real-world and optimal place-based policies can yield sizable local and aggregate welfare gains.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qjad010 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
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:oup:qjecon:v:138:y:2023:i:3:p:1507-1576.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().