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Land development, search frictions, and city structure

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  • Yasuhiro Sato

    ()
    (Graduate School of Economics, Osaka University)

  • Wei Xiao

    ()
    (Department of Economics, Stockholm University)

Abstract

This paper analyzes the interactions between labor and housing (and land) markets in a city. We develop a monocentric city model involving land development and frictional unemployment. Unemployment, the spatial structure of a city, land development, housing demand, prices of housing and land are all endogenously determined in the model. We then characterize two different spatial configurations, spatial mismatch equilibrium in which unemployed workers are located far from jobs and integrated equilibrium in which unemployed workers live in areas close to jobs. To better understand how two equilibria are affected by labor market parameters, such as search intensity, wage, job finding rate, job destruction rate, and so on, we implement a comparative steady state analysis. We further explored the effects of policies such as a tax on land development to subsidize residents, a subsidy to reduce residentsf commuting costs, and a subsidy to improve unemployed workersf benefits.

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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 13-12.

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Length: 42 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:osk:wpaper:1312

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Land development; City structure; Search frictions; Spatial mismatch;

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  1. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens, 2010. "Housing Externalities," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 485-535, 06.
  2. Anderson John E., 1993. "Land Development, Externalities, and Pigouvian Taxes," Journal of Urban Economics, Elsevier, vol. 33(1), pages 1-9, January.
  3. Wheaton, William C., 1974. "A comparative static analysis of urban spatial structure," Journal of Economic Theory, Elsevier, vol. 9(2), pages 223-237, October.
  4. Wheaton, William C., 1976. "On the optimal distribution of income among cities," Journal of Urban Economics, Elsevier, vol. 3(1), pages 31-44, January.
  5. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
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