Using U.S. Census microdata, we show that, on average, workers change occupation and industry less
in more densely populated areas. The result is robust to standard demographic controls, as well as
to including aggregate measures of human capital and sectoral mix. Analysis of the displaced worker
surveys shows that this effect is present in cases of involuntary separation as well. On the other hand, we
actually find the opposite result (higher rates of occupational and industrial switching) for the subsample
of younger workers. These results provide evidence in favor of increasing-returns-to-scale matching
in labor markets. Results from a back-of-the-envelope calibration suggest that this mechanism has an
important role in raising both wages and returns to experience in denser areas.