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Workforce Location and Equilibrium Unemployment in a Duocentric Economy with Matching Frictions

Author

Listed:
  • Etienne Lehmann
  • Paola L. Montero Ledezma
  • Bruno Van der Linden

Abstract

This article examines unemployment disparities and efficiency in a densely populated economy with two job centers and workers distributed between them. We introduce commuting costs and search-matching frictions to deal with the spatial mismatch between workers and firms. In a decentralized economy job-seekers do not internalize a composition externality they impose on all the unemployed. With symmetric job centers, a change in the distribution of the workforce can lead to asymmetric equilibrium outcomes. We calibrate the model for Los Angeles and Chicago Metropolitan Statistical Areas. Simulations suggest that changes in the workforce distribution have non-negligible effects on unemployment rates, wages, and net output, but cannot be the unique explanation of a substantial mismatch problem.

Suggested Citation

  • Etienne Lehmann & Paola L. Montero Ledezma & Bruno Van der Linden, 2015. "Workforce Location and Equilibrium Unemployment in a Duocentric Economy with Matching Frictions," CESifo Working Paper Series 5506, CESifo.
    • Handle: RePEc:ces:ceswps:_5506
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    References listed on IDEAS

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    More about this item

    Keywords

    spatial mismatch; commuting; urban unemployment; externality;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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