Externalities in the matching of workers and firms in Britain

We provide empirical evidence on the nature of spatial externalities in a m atching model for Britain. We use a monthly panel of outflows, unemployment and vacancy stocks data from the registers at Jobcentres in Britain; these are mapped onto travel-to-work areas. We find evidence of significant spil l-over effects that are generally in line with the predictions of theory. F or example, we find that conditional on local labour market conditions, hig h unemployment levels in neighbouring areas raise the number of local fille d vacancies but lower the local outflow from unemployment. (C) 2001 Elsevie r Science B,V. All rights reserved.