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The Intended and Unintended Effects of Promoting Labor Market Mobility

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  • Caliendo, Marco

    (University of Potsdam)

  • Künn, Steffen

    (Maastricht University)

  • Mahlstedt, Robert

    (University of Copenhagen)

Abstract

Subsidizing the geographical mobility of unemployed workers may improve welfare by relaxing their financial constraints and allowing them to find jobs in more prosperous regions. We exploit regional variation in the promotion of mobility programs along administrative borders of German employment agency districts to investigate the causal effect of offering such financial incentives on the job search behavior and labor market integration of unemployed workers. We show that promoting mobility - as intended - causes job seekers to increase their search radius, apply for and accept distant jobs. At the same time, local job search is reduced with adverse consequences for reemployment and earnings. These unintended negative effects are provoked by spatial search frictions. Overall, the unconditional provision of mobility programs harms the welfare of unemployed job seekers.

Suggested Citation

  • Caliendo, Marco & Künn, Steffen & Mahlstedt, Robert, 2022. "The Intended and Unintended Effects of Promoting Labor Market Mobility," IZA Discussion Papers 15011, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15011
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    More about this item

    Keywords

    unintended consequence; labor market mobility; active labor market policy; job search; search frictions;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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