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Urban search models under high-relocation costs. Theory and application to spatial mismatch

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  • Zenou, Yves

Abstract

We develop a 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. We finally show that a transportation policy consisting in subsidizing the commuting costs of black workers can increase job creation and reduce unemployment if the level of the subsidy is set at a sufficiently high level.

Suggested Citation

  • Zenou, Yves, 2009. "Urban search models under high-relocation costs. Theory and application to spatial mismatch," Labour Economics, Elsevier, vol. 16(5), pages 534-546, October.
  • Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:534-546
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    Cited by:

    1. Elias Einiö & Henry G. Overman, 2016. "The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI," SERC Discussion Papers 0191, Spatial Economics Research Centre, LSE.
    2. Fredrik Andersson & John C. Haltiwanger & Mark J. Kutzbach & Henry O. Pollakowski & Daniel H. Weinberg, 2018. "Job Displacement and the Duration of Joblessness: The Role of Spatial Mismatch," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 203-218, May.
    3. Picard, Pierre M. & Zenou, Yves, 2018. "Urban spatial structure, employment and social ties," Journal of Urban Economics, Elsevier, vol. 104(C), pages 77-93.
    4. Lehmann, Etienne & Montero Ledezma, Paola L. & Van der Linden, Bruno, 2013. "Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions," IZA Discussion Papers 7828, Institute for the Study of Labor (IZA).
    5. repec:eee:labeco:v:50:y:2018:i:c:p:97-111 is not listed on IDEAS
    6. repec:eee:regeco:v:73:y:2018:i:c:p:83-98 is not listed on IDEAS
    7. Lehmann, Etienne & Montero Ledezma, Paola L. & Linden, Bruno Van der, 2016. "Workforce location and equilibrium unemployment in a duocentric economy with matching frictions," Journal of Urban Economics, Elsevier, vol. 91(C), pages 26-44.
    8. Colombo, Emilio & Stanca, Luca, 2014. "Measuring the monetary value of social relations: A hedonic approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 50(C), pages 77-87.
    9. Chul-In Lee, 2010. "Can Search-Matching Models Explain Migration And Wage And Unemployment Gaps In Developing Economies? A Calibration Approach," Journal of Regional Science, Wiley Blackwell, vol. 50(2), pages 635-654.
    10. Vincent Boitier, 2014. "Unemployment Dispersion and City Configurations: Beyond the Bid Rent Theory," Working Papers hal-00999559, HAL.
    11. Ioannides, Yannis M., 2018. "A DMP model of intercity trade," Labour Economics, Elsevier, vol. 50(C), pages 97-111.

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