Matching Across Space: Evidence on Mobility in the Czech Republic

The increase in dispersion of regional unemployment in the Czech Republic despite low overall joblessness is suggestive of low labor mobility. At the same time, standard matching functions estimated with district level panel data exhibit spatial instability. A simple model of nonsequential search with endogenous search intensity can link this instability to spatial interdependence in matching, inducing complex functional forms and nonconstant returns to scale. We find a statistically significant nonuniform impact of surrounding districts on local matching, even after controlling for boundaries and sectoral heterogeneity. Constant returns for this modified matching function cannot however be rejected in most cases. This research is supported by the Sonderforschungsbereich 373 of the Deutsche Forschungsgemeinschaft "Simulation and Quantifikation wirtschaftlicher Prozesse" at the Humboldt University Berlin. We thank Mr Vit Subert and Borivoj Vyjidak of the Czech Ministry of Labor and Soci..