Job matching on connected regional and occupational labor markets

Job mobility equilibrates disparities on local labor markets and influences the efficiency of the job matching process. In this paper, we describe a job matching model that allows for simultaneous regional and occupational mobility, predicting corresponding spillover effects on the number of matches. We estimate these spillover effects based on novel administrative German data on the number of matches, unemployed, and vacancies of local labor markets, which we define as distinct occupations in distinct regions. We specify a matching function for these local labor markets with regional spillovers, occupational spillovers, as well as combined regional and occupational spillovers of unemployed and vacancies. To construct these spillover terms, we use information on the proximity between regions and on similarities between occupations in terms of qualification requirements and tasks. We find that regional spillover effects for both vacancies and the unemployed are positive, occupational spillover effects for vacancies are positive and occupational spillover effects for the unemployed are negative. The combined regional and occupational spillover effects for both vacancies and the unemployed are positive. We conclude that neglecting regional, occupational, and combined spillovers leads to biased estimates of job matching efficiency in local labor markets.