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Urban Labour Economic Theory

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  • Zenou, Yves

Abstract

In this Paper survey some recent developments in urban labour economic theory. We first present a benchmark model in which firms set efficiency wages to prevent shirking and to compensate workers for commuting. We show that both wages and unemployment depend on commuting costs, and that housing prices as well as location are based on workers’ wages. We then extend the benchmark model in two different directions. First, by assuming that workers’ effort depends on distance to jobs, we show how firms draw a red line beyond which they do not hire workers. Second, by introducing high relocation costs so that workers do not change residence as soon as they change employment status, we show that efficiency wages now depend on distance to jobs. Finally, we use these theoretical models to give some microfoundations of a well-known stylized relationship: the spatial mismatch between residential location and workplace.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4029.

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Date of creation: Aug 2003
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Handle: RePEc:cpr:ceprdp:4029

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Related research

Keywords: commuting; efficiency wages; land rent; spatial mismatch;

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  1. Zenou, Yves, 2006. "Efficiency wages and unemployment in cities: The case of high-relocation costs," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 49-71, January.
  2. Zenou, Yves, 2002. "How do firms redline workers?," Journal of Urban Economics, Elsevier, vol. 52(3), pages 391-408, November.
  3. 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.
  4. Zenou, Y. & Smith, T. E., . "Efficiency wages, involuntary unemployment and urban spatial structure," CORE Discussion Papers RP -1171, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
  6. Brueckner, Jan & Zenou, Yves, 2000. "Space And Unemployment: The Labour-Market Effects Of Spatial Mismatch," CEPR Discussion Papers 2397, C.E.P.R. Discussion Papers.
  7. Wasmer, Etienne & Zenou, Yves, 2002. "Does City Structure Affect Job Search and Welfare?," Journal of Urban Economics, Elsevier, vol. 51(3), pages 515-541, May.
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Cited by:
  1. Zenou, Yves, 2007. "Search in Cities," CEPR Discussion Papers 6197, C.E.P.R. Discussion Papers.
  2. Zenou, Yves, 2008. "Social Interactions and Labor Market Outcomes in Cities," IZA Discussion Papers 3283, Institute for the Study of Labor (IZA).
  3. Zenou, Yves, 2003. "Efficiency Wages, Urban Unemployment and Housing Consumption," Working Paper Series 606, Research Institute of Industrial Economics.
  4. Giorgio Brunello & Francesca Gambarotto, 2004. "Agglomeration Effects on Employer-Provided Training: Evidence from the UK," CESifo Working Paper Series 1150, CESifo Group Munich.
  5. Song, Yan & Zenou, Yves, 2006. "Property tax and urban sprawl: Theory and implications for US cities," Journal of Urban Economics, Elsevier, vol. 60(3), pages 519-534, November.

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