High Relocation Costs in Search-Matching Models: Theory and Application to Spatial Mismatch
Abstract
We develop a standard search-matching model in which mobility costs are so high that it is too costly for workers to relocate when a change in their employment status occurs. We show that, in equilibrium, wages increase with distance to jobs and commuting costs because firms need to compensate the transportation cost difference between the employed and unemployed workers at each location in the city. We also show that the equilibrium land rent is negatively affected by the unemployment benefit because an increase in the latter induce firms to create less jobs, which, in turn, reduces the competition in the land market. We then use this model to provide a mechanism for the observed spatial mismatch between where black workers live and where jobs are. Because blacks and whites differ by their contact rate, we show that the former reside far away from jobs, have higher unemployment rates and lower wages. This is because the housing market amplifies the negative effects of the labor market by creating additional frictions.Download Info
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2739.Length: 32 pages
Date of creation: Apr 2007
Date of revision:
Publication status: published in: Labour Economics, 2009, 16 (5), 534-546
Handle: RePEc:iza:izadps:dp2739
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Related research
Keywords: spatial mismatch hypothesis; search frictions; spatial frictions; efficiency;Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, and Immigrants; Non-labor Discrimination
- 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-2007-04-21 (All new papers)
- NEP-DGE-2007-04-21 (Dynamic General Equilibrium)
- NEP-GEO-2007-04-21 (Economic Geography)
- NEP-LAB-2007-04-21 (Labour Economics)
- NEP-URE-2007-04-21 (Urban & Real Estate Economics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- 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.
- Fougère, Denis & Pradel, Jacqueline & Roger, Muriel, 2009. "Does the public employment service affect search effort and outcomes?," European Economic Review, Elsevier, vol. 53(7), pages 846-869, October.
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