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<p>People live and work in local markets spatially distinct from one another, yet
space is absent from most economic models of the national labor market. Workers choose
the markets in which they will participate, but there are costs to mobility. Furthermore,
cities are heterogeneous in a number of dimensions, including their local labor market
productivity, their housing supply, and their offering of amenities.</p><p>I examine
the impact of these spatial considerations on the dynamics of local labor markets
and the national market to which they aggregate. First I study the patterns of location
choice through a gravity model of migration applied to rich panel data from the U.S.
I find that location choices respond to temporal shocks to the labor market, but only
after controlling for local heterogeneity. Next, with this result as motivation,
I turn to development of a dynamic spatial equilibrium of the national labor market.
I make a technical contribution to work in dynamic equilibrium modeling by empirically
implementing an island economy model of worker mobility. I quantify the importance
of worker mobility costs versus local housing prices for explaining spatial variation
in the unemployment rate. I find that the link between the local housing market and
the local labor market is important for explaining the spatial dispersion in unemployment,
but mobility costs are not. Finally, I further exploit the dynamic equilibrium framework
to examine the effect of local housing policy on labor market growth. I find that
housing supply regulation is a constraint to growth, but is only binding on cities
that are particularly desirable because of their labor market opportunities or amenities.
I find that some lightly regulated markets have a contingent of population that has
been pushed out of more regulated markets by high housing prices.</p>
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