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Regional dependencies in job creation: an efficiency analysis for Western Germany

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This paper investigates the efficiency of the matching process between job seekers and vacancy posting firms in West Germany, using variation across labour market regions and across time. The results of a stochastic frontier analysis shed new light on the extent of and regional differences in search frictions, on potential determinants of frictional inefficiencies and on the consequences of German reunification for the matching process. The paper also presents novel evidence on the complex interactions between spatial contingencies among regional labour markets: matching efficiency decreases with spatial autocorrelation in hiring, implying indirect evidence for crowding externalities.

Document Type: Research Article


Affiliations: 1: Department of Business Administrati on, University of Cologne, Herbert-Lewin-Str. 2, D-50931 Cologne, Germany and IZA, Bonn, Germany 2: IZA, Bonn and University of Bonn, Germany

Publication date: June 10, 2006

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