Advanced Search
MyIDEAS: Login to save this article or follow this journal

Indirect benefits of infrastructure improvement in the case of an imperfect labor market

Contents:

Author Info

  • Zhu, Xueqin
  • Van Ommeren, Jos
  • Rietveld, Piet

Abstract

We perform a welfare analysis of transport infrastructure improvements in the presence of an imperfect labor market, allowing for endogenous wages and involuntary unemployment. Efficiency wage setting is incorporated in a spatial two-region general equilibrium model, written as a welfare program. In our model, firms set wages above the market clearing level to create an inducement for employees not to shirk. The economy-wide effect (i.e. social welfare or total welfare) consists of the direct effect in transport market and the indirect effect in other markets. We conduct welfare analyses different from the conventional cost-benefit analysis, in which we distinguish between the direct welfare effect based on consumer surplus in the transport market and the indirect welfare effect through changes in regional unemployment, which is captured in the economy-wide effect. In our model, infrastructure improvement may increase unemployment in one region, but overall unemployment levels fall. The indirect welfare effects through decreases in overall unemployment are about 10-20% of the direct welfare effects for most plausible labor market parameters. The indirect welfare effects are larger, the poorer the initial transport infrastructure and the larger the labor market imperfections.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V99-4T13J4C-2/2/864a69190abafa3fc5a9867ef63fd145
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

Volume (Year): 43 (2009)
Issue (Month): 1 (January)
Pages: 57-72

as in new window
Handle: RePEc:eee:transb:v:43:y:2009:i:1:p:57-72

Contact details of provider:
Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/548/description#description

Order Information:
Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
Web: https://shop.elsevier.com/order?id=548&ref=548_01_ooc_1&version=01

Related research

Keywords: Regional modeling Surplus equivalence problem Efficiency wage theory Transport infrastructure Welfare effects;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Zenou, Yves, 1999. "Urban Unemployment, Agglomeration and Transportation Policies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2309, C.E.P.R. Discussion Papers.
  2. Jones, Rich & Whalley, John, 1989. "A Canadian regional general equilibrium model and some applications," Journal of Urban Economics, Elsevier, vol. 25(3), pages 368-404, May.
  3. Victor Ginsburgh & Michiel Keyzer, 2002. "The structure of applied general equilibrium models," ULB Institutional Repository 2013/3313, ULB -- Universite Libre de Bruxelles.
  4. Anthony J. Venables, 2007. "Evaluating Urban Transport Improvements: Cost-Benefit Analysis in the Presence of Agglomeration and Income Taxation," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 41(2), pages 173-188, May.
  5. Goerke, Laszlo, 2000. "On the structure of unemployment benefits in shirking models," Labour Economics, Elsevier, vol. 7(3), pages 283-295, May.
  6. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  7. Ninette Pilegaard & Mogens Fosgerau, 2008. "Cost Benefit Analysis of a Transport Improvement in the Case of Search Unemployment," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 42(1), pages 23-42, January.
  8. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 676-90, September.
  9. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 78(2), pages 383-88, May.
  10. Dasgupta, Partha & Ray, Debraj, 1986. "Inequality as a Determinant of Malnutrition and Unemployment: Theory," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 96(384), pages 1011-34, December.
  11. Bovenberg, A.L. & Graafland, J.J. & Mooij, R.A. de, 2000. "Tax reform and the Dutch labour market: An applied general equilibrium approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-83974, Tilburg University.
  12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  13. Bröcker, Johannes & Schneider, Martin, 1999. "How does economic development in eastern Europe affect Austria's regions? A multiregional general equilibrium framework," Discussion Papers 1/99, Dresden University of Technology, Faculty of Transportation and Traffic Sciences "Friedrich List", Institute for Transport and Economics.
  14. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
  15. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
  16. Calvo, Guillermo, 1979. "Quasi-Walrasian Theories of Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 69(2), pages 102-07, May.
  17. 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.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mogens Fosgerau & Kurt Van Dender, 2013. "Road pricing with complications," Transportation, Springer, Springer, vol. 40(3), pages 479-503, May.
  2. Jonas Westin, 2011. "Labor Market Effects of Road Pricing in a Population with Continuously Distributed Value of Time," ERSA conference papers ersa10p1458, European Regional Science Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:transb:v:43:y:2009:i:1:p:57-72. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.