Optimal regional labor market policies

We document large and persistent spatial dispersion in unemployment rates, vacancies, labor market tightness, flows, wages for Germany on a granular regional level. find that both differences inflows into outflows from are important accounting the rates. Within search- matching model with risk-averse agents, moral hazard, endogenous separations free mobility we show an optimal policy response to requires place-based tax insurance system together policies conditioning flows. allow regions differ along multiple dimensions characterize trade-offs between insurance, redistribution efficiency quantitatively. move towards explicitly conditions characteristics could lead sizable welfare employment gains.