Regional Equilibrium Unemployment Theory at the Age of the Internet
AbstractThis paper studies equilibrium unemployment in a two-region economy where homogeneous workers and jobs are free to move and the housing market clears. Because of the Internet, searching for a job in another region without first migrating there is nowadays much simpler than in the past. Search-matching externalities are amplified by this possibility and by the fact that some workers can simultaneously receive a job offer from each region. The rest of the framework builds on Moretti (2011). We study numerically the impacts of various local shocks in a stylized US economy. Contrary to what could be expected, increasing matching effectiveness in the other region yields growing regional unemployment rates. We characterize the optimal allocation and conclude that the Hosios condition is not sufficient to restore efficiency. In the efficient allocation, the regional unemployment rates are much lower than in the decentralized economy and nobody searches in the other region.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7763.
Length: 45 pages
Date of creation: Nov 2013
Date of revision:
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Other versions of this item:
- Vanessa LUTGEN & Bruno VAN DER LINDEN, 2013. "Regional Equilibrium Unemployment Theory at the Age of the Internet," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-06 (All new papers)
- NEP-DGE-2013-12-06 (Dynamic General Equilibrium)
- NEP-GEO-2013-12-06 (Economic Geography)
- NEP-LAB-2013-12-06 (Labour Economics)
- NEP-URE-2013-12-06 (Urban & Real Estate Economics)
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