Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Local labor market conditions are strongly persistent. Using a search-and-matching model with agglomeration effects and worker and firm migration, we study the transitional dynamics of a regional economy. The model is fitted to mimic local labor market dynamics using state-level U.S. time series. Agglomeration economies generate strong persistence in the employment level response to a labor demand shock, while agglomeration diseconomies dampen the shock. The amplification of the local unemployment rate response critically depends on wage rigidity. Short-term place-based policies can help the region since they dampen the impact of the shock on the employment level.