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Efficiency wages, involuntary unemployment and urban spatial structure

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  • Zenou, Yves
  • Smith, Tony E.

Abstract

The labor market model is developed within an urban spatial context, where it is shown that effeciency-wage policies can lead to significant levels of involuntary unemployment. Commuting cost differences between workers and nonworkers tend to increase unemployment, and competition for land tends to segregate workers and non-workers, with nonworkers relegated to the urban fringe. These findings are extended to a two-city system, where it is shown that even with free mobility of workers, significant wage and unemployment differentials can exist between cities characterized by different levels of productivity.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 25 (1995)
Issue (Month): 4 (August)
Pages: 547-573

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Handle: RePEc:eee:regeco:v:25:y:1995:i:4:p:547-573

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  1. Kim, Sunwoong, 1991. "Heterogeneity of labor markets and city size in an open spatial economy," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 21(1), pages 109-126, May.
  2. Carmichael, H Lorne, 1990. "Efficiency Wage Models of Unemployment--One View," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 28(2), pages 269-95, April.
  3. Rene Morissette, 1993. "Canadian Jobs and Firm Size: Do Smaller Firms Pay Less?," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 159-74, February.
  4. Schweizer, Urs & Varaiya, Pravin & Hartwick, John, 1976. "General equilibrium and location theory," Journal of Urban Economics, Elsevier, vol. 3(3), pages 285-303, July.
  5. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 74(2), pages 200-205, May.
  6. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198284345, October.
  7. James B. Rebitzer & Michael D. Robinson, 1991. "Employer Size and Dual Labor Markets," NBER Working Papers 3587, National Bureau of Economic Research, Inc.
  8. repec:fth:prinin:264 is not listed on IDEAS
  9. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
  10. Wheaton, William C., 1976. "On the optimal distribution of income among cities," Journal of Urban Economics, Elsevier, vol. 3(1), pages 31-44, January.
  11. White, Michelle J., 1976. "Firm suburbanization and urban subcenters," Journal of Urban Economics, Elsevier, vol. 3(4), pages 323-343, October.
  12. White, Michelle J., 1988. "Location choice and commuting behavior in cities with decentralized employment," Journal of Urban Economics, Elsevier, vol. 24(2), pages 129-152, September.
  13. Yinger, John, 1992. "City and suburb: Urban models with more than one employment center," Journal of Urban Economics, Elsevier, vol. 31(2), pages 181-205, March.
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