Search, Wage Posting, and Urban Spatial Structure
AbstractWe develop an urban-search model in which firms post wages. When all workers are identical, there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labor costs. When workers differ according to the value imputed to leisure, we show that, under some conditions, two wages emerge in equilibrium. The commuting cost affects the land market but also the labor market through wages. Workers’ productivity also affects housing prices and this impact can be positive or negative depending on the location in the city. We then run some numerical simulations to reproduce some stylized facts about the labor-market outcomes of black and white workers. We find that a reduction in commuting costs for all workers reduces the unemployment rate of white workers and the profit of all firms but increases the wage of all workers (black and white) and raises the fraction of firms posting the high wage.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:22.
Length: 44 pages
Date of creation: 08 Nov 2010
Date of revision:
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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
More information through EDIRC
Diamond paradox; urban land-use; spatial compensation; search frictions; wage dispersion;
Other versions of this item:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
- NEP-DGE-2010-11-20 (Dynamic General Equilibrium)
- NEP-GEO-2010-11-20 (Economic Geography)
- NEP-LAB-2010-11-20 (Labour Economics)
- NEP-URE-2010-11-20 (Urban & Real Estate Economics)
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