Essays on Spatial Inequality, Mobility, and Labor Market Policy

Abstract

This dissertation consists of three essays on spatial inequality, worker mobility, and labor market policy. The first chapter studies how workers' careers differ depending on the local labor market in which they enter employment. Using German administrative data, it shows that worker mobility is low and that workers who move do not systematically relocate to regions with lower unemployment. It further documents that workers starting their careers in high-unemployment regions experience more unemployment, lower wages, slower wage growth, and substantially lower accumulated earnings. <br/>

The second chapter examines why workers move so little despite large regional differences in career prospects. It documents that high-rent regions offer faster wage growth rather than substantially higher entry wages and that regional occupational specialization accounts for much of the variation in local wage profiles. A calibrated general-equilibrium life-cycle model with region-specific human-capital accumulation and local housing markets shows that high rents deter young workers from moving, while human capital that is most productive in the region where it was accumulated creates lock-in effects for older workers. Expanding housing supply in high-growth regions increases mobility, output, and welfare. <br/>

The third chapter compares short-time work with lay-off taxes as instruments for reducing inefficient employment separations. In a search-and-matching model with risk-averse workers and financially constrained firms, lay-off taxes reduce inefficient separations without distorting working hours, but they cannot affect separations at constrained firms that are unable to insure workers against adverse shocks through wages. Short-time work can prevent such separations and provide income insurance, but does so at the cost of inefficient reductions in working hours. Quantitatively, short-time work becomes the preferred instrument when the share of financially constrained firms is sufficiently large. <br/>

Taken together, the essays show how regional and firm-level heterogeneity shapes workers' careers, mobility decisions, and the effectiveness of labor-market policies.