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Keywords:

  • J6;
  • J3;
  • R3

Abstract

I develop a stylized partial on-the-job equilibrium search model that incorporates a spatial dimension. Workers reside on a circle and can move at a cost. Each point on the circle has a wage distribution. Implications about wages and job mobility are drawn from the model and tested on Danish matched employer–employee data. The model predictions hold true. I find that workers working farther away from their residence earn higher wages. When a worker is making a job-to-job transition where he/she changes workplace location he/she experiences a higher wage change than a worker making a job-to-job transition without changing workplace location. However, workers making a job-to-job transition that makes the workplace location closer to the residence experience a wage drop. Furthermore, low-wage workers and workers with high transportation costs are more likely to make job-to-job transitions, but also residential moves.