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Does Space Affect Search? A Theory of Local Unemployment

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Author Info
Wasmer, Etienne
Zenou, Yves

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Abstract

The spatial dispersion of economic agents is an immediate determinant of informational imperfections. We investigate how this dispersion creates search frictions and thus rationing. For that, we develop a model of local labour markets in which workers' search efficiency is negatively affected by distance to jobs. Workers' location in a city is endogenous and reflects a trade-off between commuting costs and the surplus associated with search. Different configurations emerge in equilibrium: notably, the unemployed workers may reside far away or close to the jobs. The labour market equilibrium itself depends crucially on these urban equilibria since the aggregate information about economic opportunities depends on the shape of the city. We show that there exists a unique and stable market equilibrium in which both land and labour markets are solved for simultaneously. We then decompose unemployment in two parts: the level reached if all agents were residing in the same location and an additional term due to the spatial dispersion.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2157.

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Date of creation: May 1999
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Handle: RePEc:cpr:ceprdp:2157

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Related research
Keywords: Equilibrium Unemployment Local Labour Markets Matching Urban Land Use Equilibrium

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns

References listed on IDEAS
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  1. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  2. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October. [Downloadable!] (restricted)
  3. Ihlanfeldt, Keith R & Sjoquist, David L, 1990. "Job Accessibility and Racial Differences in Youth Employment Rates," American Economic Review, American Economic Association, vol. 80(1), pages 267-76, March. [Downloadable!] (restricted)
  4. Holzer, Harry J, 1988. "Search Method Use by Unemployed Youth," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 1-20, January. [Downloadable!] (restricted)
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  5. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October. [Downloadable!] (restricted)
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  6. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
  7. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  8. O'Regan Katherine M. & Quigley John M., 1993. "Family Networks and Youth Access to Jobs," Journal of Urban Economics, Elsevier, vol. 34(2), pages 230-248, September. [Downloadable!] (restricted)
  9. Ihlanfeldt, Keith R., 1997. "Information on the Spatial Distribution of Job Opportunities within Metropolitan Areas," Journal of Urban Economics, Elsevier, vol. 41(2), pages 218-242, March. [Downloadable!] (restricted)
  10. Barron, John M & Gilley, Otis W, 1981. "Job Search and Vacancy Contacts: Note," American Economic Review, American Economic Association, vol. 71(4), pages 747-52, September. [Downloadable!] (restricted)
  11. Zax, Jeffrey S & Kain, John F, 1996. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 472-504, July. [Downloadable!] (restricted)
  12. Rogers, Cynthia L., 1997. "Job Search and Unemployment Duration: Implications for the Spatial Mismatch Hypothesis," Journal of Urban Economics, Elsevier, vol. 42(1), pages 109-132, July. [Downloadable!] (restricted)
  13. Richard Arnott, 1997. "Economic Theory and the Spatial Mismatch Hypothesis," Boston College Working Papers in Economics 390., Boston College Department of Economics. [Downloadable!]
  14. Seater, John J, 1979. "Job Search and Vacancy Contacts," American Economic Review, American Economic Association, vol. 69(3), pages 411-19, June. [Downloadable!] (restricted)
  15. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
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  16. Benabou, Roland, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 619-52, August. [Downloadable!] (restricted)
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  17. Smith, Tony E. & Zenou, Yves, 1997. "Dual Labor Markets, Urban Unemployment, and Multicentric Cities," Journal of Economic Theory, Elsevier, vol. 76(1), pages 185-214, September. [Downloadable!] (restricted)
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  18. Holzer, Harry J, 1987. "Informal Job Search and Black Youth Unemployment," American Economic Review, American Economic Association, vol. 77(3), pages 446-52, June. [Downloadable!] (restricted)
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  19. Topa, Giorgio, 1997. "Social Interactions, Local Spillovers and Unemployment," Working Papers 97-17, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  20. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June. [Downloadable!] (restricted)
  21. Chirinko, Robert S, 1982. "An Empirical Investigation of the Returns to Job Search," American Economic Review, American Economic Association, vol. 72(3), pages 498-501, June. [Downloadable!] (restricted)
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  22. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Mihails Hazans, 2005. "Does Commuting Reduce Wage Disparities?," Labor and Demography 0509012, EconWPA. [Downloadable!]
    Other versions:
  2. Brueckner, Jan & Thisse, Jacques-François & Zenou, Yves, 2000. "Local Labour Markets, Job Matching and Urban Location," CEPR Discussion Papers 2612, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Zenou, Yves, 1999. "Urban Unemployment, Agglomeration and Transportation Policies," CEPR Discussion Papers 2309, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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