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Equilibrium Search Unemployment with Explicit Spatial Frictions

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Author Info
Wasmer, Etienne (Université du Quebec à Montreal, CIRPEE, CEPR and IZA Bonn)
Zenou, Yves () (IUI, GAINS, CEPR and IZA Bonn)

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Abstract

Assuming that job search efficiency decreases with distance to jobs, workers’ location in a city depends on spatial elements such as commuting costs and land prices and on labour elements such as wages and the matching technology. In the absence of moving costs, we show that there exists a unique equilibrium in which employed and unemployed workers are perfectly segregated but move at each employment transition. We investigate the interactions between the land and the labour market equilibrium and show under which condition they are interdependent. When relocation costs become positive, a new zone appears in which both the employed and the unemployed co-exist and are not mobile. We demonstrate that the size of this area goes continuously to zero when moving costs vanish. Finally, we endogeneize search effort, show that it negatively depends on distance to jobs and that long and shortterm unemployed workers coexist and locate in different areas of the city.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1465.

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Length: 31 pages
Date of creation: Jan 2005
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Handle: RePEc:iza:izadps:dp1465

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Related research
Keywords: local labour markets; relocation costs; search effort; job matching;

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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

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References listed on IDEAS
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. 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)
    Other versions:
  2. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier. [Downloadable!] (restricted)
    Other versions:
  3. Jan K. Brueckner & Yves Zenou, 2003. "Space and Unemployment: The Labor-Market Effects of Spatial Mismatch," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 242-241, January. [Downloadable!]
    Other versions:
  4. Zenou, Yves, 2002. "How do firms redline workers?," Journal of Urban Economics, Elsevier, vol. 52(3), pages 391-408, November. [Downloadable!] (restricted)
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  7. 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)
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  12. 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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  13. van Ommeren, Jos & Rietveld, Piet & Nijkamp, Peter, 1997. "Commuting: In Search of Jobs and Residences," Journal of Urban Economics, Elsevier, vol. 42(3), pages 402-421, November. [Downloadable!] (restricted)
  14. Brueckner, Jan K., 1987. "The structure of urban equilibria: A unified treatment of the muth-mills model," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 20, pages 821-845 Elsevier. [Downloadable!] (restricted)
  15. 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)
  16. 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)
  17. 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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  18. 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. [Downloadable!] (restricted)
  19. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
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  20. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February. [Downloadable!] (restricted)
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  22. 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)
  23. 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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  24. 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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  25. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213. [Downloadable!] (restricted)
  26. Smith, Tony E & Zenou, Yves, 2003. "Spatial Mismatch, Search Effort and Urban Spatial Structure," CEPR Discussion Papers 3731, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
Full references

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. Fougère, Denis & Pradel, Jacqueline & Roger, Muriel, 2008. "Does the Public Employment Service Affect Search Effort and Outcomes?," CEPR Discussion Papers 7095, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Zenou, Yves, 2007. "Why do Black Workers Search Less? A Transport-Mode Based Theory," CEPR Discussion Papers 6155, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Zenou, Yves, 2007. "Search, Wage Posting and Urban Spatial Structure," CEPR Discussion Papers 6286, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Zenou, Yves, 2003. "Efficiency Wages and Unemployment in Cities: The Case of High Relocation Costs," CEPR Discussion Papers 4058, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Laurent Gobillon & Harris Selod & Yves Zenou, 2005. "The mechanisms of spatial mismatch," Research Unit Working Papers 0510, Laboratoire d'Economie Appliquee, INRA. [Downloadable!]
    Other versions:
  6. GOBILLON Laurent & SELOD Harris, 2007. "The effects of segregation and spatial mismatch on unemployment: evidence from France," Research Unit Working Papers 0702, Laboratoire d'Economie Appliquee, INRA. [Downloadable!]
    Other versions:
  7. Florence Goffette-Nagot & Claire Dujardin, 2008. "Does public housing occupancy increase unemployment?," Working Papers 0833, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
    Other versions:
  8. Patacchini, Eleonora & Zenou, Yves, 2003. "Mismatch, Transport Mode and Search Decisions in England," CEPR Discussion Papers 3968, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Selod, Harris & Zenou, Yves, 2004. "City Structure, Job Search, and Labor Discrimination. Theory and Policy Implications," Working Paper Series 620, Research Institute of Industrial Economics. [Downloadable!]
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  10. Zenou, Yves, 2007. "Search in Cities," CEPR Discussion Papers 6197, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Yves Zenou, 2007. "High Relocation Costs in Search-Matching Models: Theory and Application to Spatial Mismatch," IZA Discussion Papers 2739, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Sabrina Di Addario, 2005. "Job Search in Thick Markets: Evidence from Italy," Development Working Papers 198, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
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  13. Carole Brunet & Jean-Yves Lesueur, 2003. "Do homeowners stay unemployed longer ? A French micro-econometric study," Post-Print halshs-00178576_v1, HAL. [Downloadable!]
  14. Yves Zenou, 2007. "Endogenous Job Destruction and Job Matching in Cities," IZA Discussion Papers 2695, Institute for the Study of Labor (IZA). [Downloadable!]
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  15. Tyrowicz, Joanna & Wojcik, Piotr, 2009. "Nonlinear Stochastic Convergence Analysis of Regional Unemployment Rates in Poland," MPRA Paper 15384, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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