Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 607: Search Activities, Cost of Living and Local Labor Markets

Eleonora Patacchini () and Yves Zenou ()
Additional contact information
Eleonora Patacchini: University of Southampton, Postal: Department of Economics, Southampton, SO17 1BJ, United Kingdom
Yves Zenou: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: A model is considered in which optimal search intensity is a result of a trade off between short run losses due to higher search costs (more interviews, commuting...) and long-run gains due to a higher chance of finding a job. We show that this optimal search intensity is higher in areas characterized by larger cost of living and/or higher labor market tightness. This model is then tested for England on sub-regional data. We estimate a spatial error model and we find that both the local cost of living and the local labor market tightness are found to have a positive and significant effect on unemployed average search intensity. These findings are consistent with the prediction of the theoretical model.

Keywords: Job Matching; Search Intensities; Spatial Correlation

JEL-codes: C21; J64; R10

31 pages, November 14, 2003

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