Job search in thick markets

I analyze empirically the effects of urban and industrial agglomeration on both search behavior and the efficiency of matching. The analysis is based on a unique panel data set from the Italian Labor Force Survey micro-data, covering 520 randomly drawn Local Labor Market Areas (66% of the total) over the four quarters of 2002. I compute transition probabilities from non-employment to employment by jointly estimating the probability of searching and the probability of finding a job conditional on having searched. I then test whether these are affected by market size, industrial variety and/or industry specialization. The main results indicate that market size and industry-specialization raise job seekers’ chances of finding employment (conditional on having searched), while industrial variety is not significantly different from zero. Finally, the effect of agglomeration on non-employed individuals’ search behavior cannot be significantly distinguished from zero.