Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities across these countries in the spatial differences in unemployment, vacancies, and vacancy filling, job finding, and separation rates. The novel facts on the geography of vacancies and vacancy filling are instrumental in guiding and disciplining the development of a theory of local labor marke performance. We find that a spatial version of the Diamond-Mortensen-Pissarides model with endogenous separations and on-the-job search quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle.

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