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Search, Wage Posting, and Urban Spatial Structure

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  • Zenou, Yves

    ()
    (Dept. of Economics, Stockholm University)

Abstract

We 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 Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:22.

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Length: 44 pages
Date of creation: 08 Nov 2010
Date of revision:
Handle: RePEc:hhs:sunrpe:2010_0022

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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
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Web page: http://www.ne.su.se/
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Related research

Keywords: Diamond paradox; urban land-use; spatial compensation; search frictions; wage dispersion;

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References

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  1. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  2. Smith, Tony E. & Zenou, Yves, 2003. "Spatial Mismatch, Search Effort and Urban Spatial Structure," IZA Discussion Papers 692, Institute for the Study of Labor (IZA).
  3. Wasmer, Etienne & Zenou, Yves, 2005. "Equilibrium Search Unemployment with Explicit Spatial Frictions," IZA Discussion Papers 1465, Institute for the Study of Labor (IZA).
  4. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  5. Glaeser, Edward L. & Kahn, Matthew E. & Rappaport, Jordan, 2008. "Why do the poor live in cities The role of public transportation," Journal of Urban Economics, Elsevier, vol. 63(1), pages 1-24, January.
  6. Damien Gaumont & Martin Schindler & Randall Wright, 2005. "Alternative Theories of Wage Dispersion," PIER Working Paper Archive 05-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  7. BRUECKNER, Jan K. & THISSE, Jacques-François & ZENOU, Yves, . "Why is central Paris rich and downtown Detroit poor? An amenity-based theory," CORE Discussion Papers RP -1370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. 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.
  9. 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.
  10. 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.
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  12. Randall W. Eberts & Joe A. Stone, 1992. "Wage and Employment Adjustment in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wea, December.
  13. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
  14. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
  15. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  16. Holzer Harry J. & Ihlanfeldt Keith R. & Sjoquist David L., 1994. "Work, Search, and Travel among White and Black Youth," Journal of Urban Economics, Elsevier, vol. 35(3), pages 320-345, May.
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  18. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  19. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-40, October.
  20. Edward L. Glaeser & Matthew E. Kahn & Jordan Rappaport, 2000. "Why Do The Poor Live In Cities?," Harvard Institute of Economic Research Working Papers 1891, Harvard - Institute of Economic Research.
  21. Sato, Yasuhiro, 2004. "City structure, search, and workers' job acceptance behavior," Journal of Urban Economics, Elsevier, vol. 55(2), pages 350-370, March.
  22. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  23. Patacchini, Eleonora & Zenou, Yves, 2005. "Spatial mismatch, transport mode and search decisions in England," Journal of Urban Economics, Elsevier, vol. 58(1), pages 62-90, July.
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Cited by:
  1. Kawata, Keisuke & Sato, Yasuhiro, 2012. "On-the-job search in urban areas," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 715-726.

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