Abstract
Matches between workers and jobs are better in thick labour markets than in thin ones. This paper measures match quality by the gap between worker skills and their job tasks in the Netherlands. The smaller the gap, the better the match between skills and tasks. The measured gaps are 14 percent of a standard deviation smaller in cities than in the Dutch countryside. The location of work explains the observed higher quality of matches, while the location of residence does not. Robustness analyses show that these results are not explained by more efficient learning in cities or the spatial distribution of industrial and service occupations. Higher matching quality is associated with higher wages and explains part of the urban wage premia. J24; J23; R12; R23
Highlights
The matching of workers to jobs is better in thick labour markets than in thin ones
4.1 Match quality in cities The theoretical framework argues that the quality of the match of worker skills to job tasks increases with the density of the local market
Workers self-select into jobs that match their skills better as their knowledge of both their own skills and required job tasks increase with experience
Summary
The matching of workers to jobs is better in thick labour markets than in thin ones. The benefits of thick labour markets first gained attention with the work of Alfred Marshall (1920). The extent to which the skills of workers suit their job tasks is used to define job match quality. Wheeler (2001) suggests that lower search costs in cities result in better matches, greater output per worker, more wage inequality, and higher expected returns to worker skills. This study contributes to this work by analysing the spatial variation in the match between worker skills and job tasks. The variable cl reflects the location costs of location l Employers maximise their revenue and seek the most skilled worker willing to accept the job. Workers and employers never match outside their segments of the market Workers maximise their expected nominal wage, given their segment, while choosing a job and do not consider possible promotions or job changes: w(a, l) = max[ Elw(αz, l) − w(αz−) − cl] ,. Given the number of vacancies and job seekers, the maximum number of matches in the local market is created. If the number of job seekers in the market (z, l) exceeds the number of vacancies, all vacancies are filled and vice versa
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