Should I Stay or Should I Go? Mobility Assistance and Job Finding Strategies

Supporting regional mobility among the unemployed potentially reduces unemployment in depressed regions and eliminates the shortage of labor in prosperity areas. Therefore, the German active labor market policy provides financial assistance to unemployed job seekers when searching and/or accepting distant jobs. Recent evidence has shown that job seekers who receive a relocation assistance and move to a distant region improve their labor market performance substantially, i.e., they earn higher wages and end up in more stable jobs. However, the question arises how to influence their search behavior in terms of geographical mobility and therefore the transition from unemployment to employment. In this study, we use a rich survey on German job seekers newly entering unemployment to investigate whether the availability of mobility assistance programs affects the search strategy of the unemployed, i.e., the probability to search for distant jobs, and resulting consequences on subsequent labor market outcomes. Causal estimates are based on an instrumental variable approach exploiting regional differences with respect to the local employment agencies preferences for mobility programs. The results show that the availability of mobility programs increases individuals' willingness to apply for distant jobs, resulting in a general increase in search effort and higher employment probabilities.