Spatial Equilibrium with Unemployment and Wage Bargaining: Theory and Estimation
AbstractIn this paper, we present a spatial equilibrium model where search frictions hinder the immediate reallocation of workers both within and across local labour markets. Because of the frictions, firms and workers find themselves in bilateral monopoly positions when determining wages. Although workers are not at each instant perfectly mobile across cities, in the baseline model we assume that workers flows are sufficient to equate expected utility across markets. We use the model to explore the joint determination of wages, unemployment, house prices and city size (or migration). A key role of the model is to clarify conditions under which this type of spatial equilibrium setup can be estimated. We then use U.S. data over the period 1970-2007 to explore the fit of model and it quantitative properties of the model. Our main goal is to highlight forces that influence spatial equilibria at 10 year intervals.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19118.
Date of creation: Jun 2013
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Other versions of this item:
- Beaudry, Paul & Green, David A. & Sand, Benjamin M., 2014. "Spatial equilibrium with unemployment and wage bargaining: Theory and estimation," Journal of Urban Economics, Elsevier, vol. 79(C), pages 2-19.
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
- NEP-DGE-2013-06-16 (Dynamic General Equilibrium)
- NEP-LAB-2013-06-16 (Labour Economics)
- NEP-URE-2013-06-16 (Urban & Real Estate Economics)
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