The Spatial Stratification of Local Labor Markets and Economic Opportunity

• Applicants: Professor Dr. Sebastian Findeisen; Dr. Andreas Mense
• Subject Area: Economic Policy, Applied Economics ; Economic Theory
• Term: since 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 527633267

Economic opportunity is far from being equally distributed. A recent literature has found that location, down to the level of neighborhoods, strongly influences upward mobility. Yet, the mechanisms – why some places provide economic opportunities while others do not – remain elusive. Two candidate explanations are the structure of the local labor market and the quality of local social networks. From the perspective of an individual worker, the spatial structure of the local labor market is determined to a great extent by accessibility of job opportunities within the local labor market, which may depend crucially on the worker’s social network, but also on transport modes and residential locations available to that worker. For these reasons, understanding the spatial stratification of local labor markets and its impact on economic opportunity is the major theme of our project. We employ a novel geo-referenced matched employer-employee data set for Germany covering the years 2000 to 2021, which we combine with various other geo-referenced data sources. Our project is divided into three parts studying the role of, respectively, firms, social networks, and housing for labor market opportunities. In Part 1, we will focus on the role of employers in providing economic opportunity to young workers. For identification, we exploit variation in employer accessibility due to extensions of rail-based public transport. In Part 2, we investigate the importance of local social networks for spatial differences in economic opportunities. To do so, we will leverage the arguably exogenous assignment of social housing applicants to different buildings by the local housing offices, and the resulting difference in exposure to higher- and lower-income co-residents. In Part 3, our goal is to provide novel evidence how the availability of housing interacts with labor market opportunities. To this end, we plan to study the impact of new land supply due to military base closures in many German cities following the end of the cold war, on labor market outcomes, the spatial distribution of economic activity, and opportunity inside these cities.

• DFG Programme: Research Grants