Abstract

The efficiency of job matching on local labor markets is susceptible to the spillovers caused both by regional and occupational mobility. In the present paper, we use novel administrative German data on the number of matches, unemployed and vacancies in the local labor markets that vary by both region and occupational titles. We compare the fixed-effects estimation of the matching function on disaggregated labor markets taking account of the connectedness both among local areas and occupations. For doing this, we apply standard geographical topology for proximity between regions and an “occupational topology” that describes similarities between occupations in terms of qualification requirements and tasks. The estimation shows that negligence of spillover effect leads to biased estimation of the efficiency of job matching in the local labor markets. Moreover, we conclude that existing regional spillovers help to mitigate negative effects of competition for vacancies among the unemployed in similar occupations.