published in: Regional Science and Urban Economics, 2006, 36(2), 227-248
A model is considered in which optimal search intensity is a result of a tradeoff between
short-run losses due to higher search costs (more interviews, commuting…) and long-run
gains due to a higher chance of finding a job. We show that this optimal search intensity is
higher in areas characterized by larger cost of living and/or higher labor market tightness. We
then test this model using county-level data in England for the period 1991-2000. As
predicted by the theoretical model, both the (county) cost of living and the (county) labor
market tightness are found to have a positive and significant effect on the (county) search
intensity. We also find positive spatial correlation between counties (i.e. clustering of counties
with similar level of search intensity) and strong spatial spillover effects.
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