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Efficiency Wages, Involuntary Unemployment and Urban Spatial Structure

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  • ZENOU, Yves

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium and Université Panthéon-Assas, Paris)

  • SMITH, Tony E.

    (Regional Science Graduate Group, University of Pennsylvania, Philadelphia)

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

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1994076.

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Date of creation: 01 Dec 1994
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Handle: RePEc:cor:louvco:1994076

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Keywords: Efficiency wages; unemployment; labor markets;

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  1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, October.
  2. White, Michelle J., 1976. "Firm suburbanization and urban subcenters," Journal of Urban Economics, Elsevier, vol. 3(4), pages 323-343, October.
  3. Carmichael, H Lorne, 1990. "Efficiency Wage Models of Unemployment--One View," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 269-95, April.
  4. Kim, Sunwoong, 1991. "Heterogeneity of labor markets and city size in an open spatial economy," Regional Science and Urban Economics, Elsevier, vol. 21(1), pages 109-126, May.
  5. repec:fth:prinin:264 is not listed on IDEAS
  6. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  7. Rebitzer, James B & Robinson, Michael D, 1991. "Employer Size and Dual Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 710-15, November.
  8. 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.
  9. Wheaton, William C., 1976. "On the optimal distribution of income among cities," Journal of Urban Economics, Elsevier, vol. 3(1), pages 31-44, January.
  10. 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.
  11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  12. Schweizer, Urs & Varaiya, Pravin & Hartwick, John, 1976. "General equilibrium and location theory," Journal of Urban Economics, Elsevier, vol. 3(3), pages 285-303, July.
  13. 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.
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