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HANDBOOK OF LABOR ECONOMICS, VOL 4B by David Card, Orley Ashenfelter

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Chapter 14

Local Labor Markets*

Moretti Enrico, UC Berkeley, NBER, CEPR and IZA

Abstract

I examine the causes and the consequences of differences in labor market outcomes across local labor markets within a country. The focus is on a long-run general equilibrium setting, where workers and firms are free to move across localities and local prices adjust to maintain the spatial equilibrium. In particular, I develop a tractable general equilibrium framework of local labor markets with heterogenous labor. This framework is useful in thinking about differences in labor market outcomes of different skill groups across locations. It clarifies how, in spatial equilibrium, localized shocks to a part of the labor market propagate to the rest of the economy ...

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