This presentation is part of: R10-1 Urban and Regional Economics

Some Empirical Evidence of the Efficacy of Job Matching in Urban Labor Markets

Jeffrey J. Yankow, Ph.D., Economics, Furman University, 3300 Poinsett Highway, Greenville, SC 29613

Some Empirical Evidence of the Efficacy of Job Matching in Urban Labor Markets

 Abstract:  Recent empirical work (see Yankow (2006), Wheeler (2006), and Andersson, Burgess, and Lane (2007)) has demonstrated the likely importance of job matching in explaining the urban wage premium.  However, direct empirical evidence of superior job matching in urban labor markets has proven elusive.  Using data from the 1980, 1984, 1996, and 2000 waves of the National Longitudinal Survey of Youth 1979, I test for the effectiveness job matching in urban labor markets by examining the employed search behavior of young workers.  Formal search theory suggests that drawing from a superior wage offer distribution, realizing a higher arrival rate of job offers, and/or having lower search costs increases the expected net benefits of search, making both search and job change more likely.  Because each is more likely to be true for workers searching in dense urban labor markets, a straightforward prediction is that workers in cities are more likely to engage in job search, ceteris paribus.  Over time, as workers move into superior job matches, the expected benefit of continued search declines.  If job search is more efficient in urban labor markets as hypothesized, then the quality of a given job match should also tend to be higher in cities, ceteris paribus.  Consequently, employed workers living in cities might be expected to search less than their non-urban counterparts if the average job match is better in cities.  In this latter instance, it is not city residency itself that makes search less likely, but rather a positive correlation between city residency and job match.  Therefore, regression models that omit measures of the quality of the job match between the worker and firm produced biased coefficients for indicators of urban residency, since the estimated coefficient confounds the (positive) impact of the urban labor market itself on the propensity to search and the (negative) influence of a good job match.  Empirical estimation confirms this prediction:  The estimated coefficient on an indicator of urban residency is found to be near zero and statistically insignificant in models of employed search that omit proxies for job match quality.  However, when such measures are included in the models, the estimated coefficient on urban residency becomes positive and highly significant.  Robustness is confirmed across a variety of linear probability and probit models, including fixed-effects (linear probability) and random-effects (probit) model specifications, as well as across a number of proxies for job match quality.