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Equilibrium Search Unemployment with Explicit Spatial Frictions

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  • Wasmer, Etienne

    ()
    (Sciences Po, Paris)

  • Zenou, Yves

    ()
    (Stockholm University)

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 short-term unemployed workers coexist and locate in different areas of the city.

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Bibliographic Info

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
Date of revision:
Publication status: published in: Labour Economics, 2006, 13 (2), 143-165
Handle: RePEc:iza:izadps:dp1465

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

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  1. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers, London School of Economics - Centre for Labour Economics 340, London School of Economics - Centre for Labour Economics.
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  9. Smith, T. E. & Zenou, Y., . "Dual labor markets, urban unemployment, and multicentric cities," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1283, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  19. Zax, J.S. & Kain, J.F., 1991. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1562, Harvard - Institute of Economic Research.
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  21. 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.
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  23. Crampton, Graham R., 1999. "Urban labour markets," Handbook of Regional and Urban Economics, Elsevier, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 39, pages 1499-1557 Elsevier.
  24. Brueckner, Jan K., 1987. "The structure of urban equilibria: A unified treatment of the muth-mills model," Handbook of Regional and Urban Economics, Elsevier, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 20, pages 821-845 Elsevier.
  25. 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.
  26. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, Elsevier, vol. 7(2), pages 188-209, February.
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