Why only minor shares of unemployed job seekers relocate in order to find employment?

In many European countries, labor markets are characterized by high regional disparities in terms of unemployment rates on the one hand, and low geographical mobility among the unemployed on the other hand.

Dr. Steffen Künn came to LISER to present one of his works in progress concerning one of his main research interest, the evaluation of labor market policy and titled “The Return to Labor Market Mobility: An Evaluation of Relocation Assistance for the Unemployed.” Beside the evaluation of traditional programs of active labor market policy (such as wage subsidies, training etc), he is particularly interested in the effectiveness of programs which aim at promoting self-employment among the unemployed.

Steffen Künn studied economics at the Free University Berlin and at Loughborough University (UK). He received his Master degree in April 2008. Afterwards he started his PhD studies in economics and received his PhD from the University of Potsdam in November 2012. He joined IZA as a Resident Research Affiliate under the IZA Scholarship Program in April 2008 and became a Research Associate at IZA in April 2012. In September 2014 he was appointed Senior Research Associate and Deputy Program Director for IZA's "Evaluation" program area.

Abstract
In many European countries, labor markets are characterized by high regional disparities in terms of unemployment rates on the one hand, and low geographical mobility among the unemployed on the other hand. This is somehow surprising and raises the question why only minor shares of unemployed job seekers relocate in order to find employment. The German active labor market policy offers a subsidy covering moving costs to incentivize unemployed job seekers to search/accept jobs in distant regions. Based on administrative data, this study provides first empirical evidence on the impact of this subsidy on participants' prospective labor market outcomes. We use an instrumental variable approach to take endogenous selection based on observed and unobserved characteristics into account when estimating causal treatment effects. We find that unemployed job seekers who participate in the subsidy program and move to a distant region receive higher wages and find more stable jobs compared to non-participants. The positive outcomes are a mixture of both better economic conditions in the new region and better job matches.