Navigating regional opportunity spaces: Labour branching towards growing jobs

Regional conditions that smoothen the process of creative destruction and reduce adjustment costs are key transformative features. The aim of this article is therefore to first assess the regional presence of low- and high-demand occupations, and second, to assess the likelihood that workers in low-demand occupations will make productive changes to high-demand occupations in their region. Using matched employer-employee data on Sweden for the period 2015–2019, we calculate the regional relatedness density for all occupations and then assess whether this ‘regional opportunity space’ provides labour market channels for workers to move from low- to high-demand occupations in the region. Our findings reveal stark regional differences in matching between low- and high-demand occupations that transcend the regional functional hierarchy. Subsequent logit regressions support the notion that regions with a high density of related high-demand occupations provide labour market channels that increase the likelihood of productive change among exposed workers. The influence of these structural regional features outweighs that of the mere presence of high-demand occupations as well as both the size and diversity of the labour market.