Working Papers on Economics - Spatial Spillover Effects in the Labor Market in a Middle-Income Country

Number: 
1283
Published: 
Authors:
Mauricio Quiñonese,
Eleonora Dávalose,
Luis Felipe Gaviriae
Classification JEL: 
J61, J64, R12, R14
Keywords: 
Matching Function, spatial spillovers, Spatial econometrics

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Abstract

Most macroeconomic labor literature on estimating matching functions does not consider spatial spillover effects. However, job search and vacancy-filling processes often involve neighboring locations, as local workers can search for and fill vacancies in nearby labor markets. We estimate a spatial spillover model using annual data for a middle-income country in Latin America. Our findings show that unemployment has a positive spatial spillover effect because an increase in the labor supply raises the probability of filling a vacancy. In contrast, vacancies have a negative spillover effect because local and neighboring vacancies compete to be filled by workers in both markets.