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Philip JUNG (TU Dörtmund ) “Optimal regional labor market policies”

December 5, 2022 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date: 05th of December 2022

Room 3001

Philip JUNG (TU Dörtmund ) “Optimal regional labor market policies”

Abstract : We document large and persistent spatial dispersion in unemployment rates, vacancies, labor market tightness, labor market flows, and wages for Germany on a granular regional level. We find that both differences in inflows into and in outflows from unemployment are important for accounting for the regional dispersion in unemployment rates. Within a search- and matching model with risk-averse agents, moral hazard, endogenous separations and free mobility we show that an optimal policy response to labor market dispersion requires a place-based tax and unemployment insurance system together with place-based policies conditioning on labor market flows. We allow regions to differ along multiple dimensions and characterize the trade-offs between insurance, regional redistribution and efficiency quantitatively. We find that for Germany a move towards an optimal place-based tax system that explicitly conditions on regional characteristics could lead to sizable welfare and employment gains.

F. Malherbet / A. Uhlendorff (CREST)