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Urban Unemployment, Agglomeration and Transportation Policies

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  • Zenou, Yves

Abstract

We study the role of unemployment in the context of the endogeneous formation of a monocentric city in which firms set efficiency wages to deter shirking. We first show that, in equilibrium, the employed locate at the vicinity of the city-centre, the unemployed reside at the city-edge and firms set up in the city-centre. We then show that there is a `spatial mismatch' between location and jobs because the further away from jobs the unemployed, the larger the level of unemployment. Finally, we derive some policy implications. We show that a policy that improves the city transportation network (by subsidizing the commuting costs of all workers) reduces urban unemployment, increasing utilities of all workers but also raising inequality, whereas a policy that supports the transportation of the unemployed only (by subsidizing their commuting costs) increases urban unemployment, not always raising workers' utilities, but reducing inequality.

Suggested Citation

  • Zenou, Yves, 1999. "Urban Unemployment, Agglomeration and Transportation Policies," CEPR Discussion Papers 2309, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2309
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    More about this item

    Keywords

    Efficiency Wages; Endogenous Location Of Workers And Firms; Spatial Mismatch; Subsidizing Commuting Costs; Urban Unemployment;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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