Does population density matter in the process of matching heterogeneous job seekers and vacancies?
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This paper studies the matching of job seekers and vacant jobs using data on local labour markets. We estimate differences in the ability of the local markets to form new matches and trace whether these differences can be explained by the differing population densities across markets or by the heterogeneity of job seekers measured by the distribution of their education level. We find that high-density areas are more efficient in forming matches than other areas despite frictions caused by the wider heterogeneity of job seekers in those areas than elsewhere.
KeywordsMatching function Local labour markets Population density Technical efficiency Education Heterogeneity
JEL codesJ64 C23
This study was funded by the Academy of Finland (project number 7210269) and Yrjö Jahnsson Foundation. We are grateful to anonymous referees, Jaakko Pehkonen, Aki Kangasharju, Pekka Ilmakunnas, and ERSA 2005 Congress participants for useful comments and suggestions.
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