Indirect benefits of infrastructure improvement in the case of an imperfect labor market
We perform a welfare analysis of transport infrastructure improvements in the presence of an imperfect labor market, allowing for endogenous wages and involuntary unemployment. Efficiency wage setting is incorporated in a spatial two-region general equilibrium model, written as a welfare program. In our model, firms set wages above the market clearing level to create an inducement for employees not to shirk. The economy-wide effect (i.e. social welfare or total welfare) consists of the direct effect in transport market and the indirect effect in other markets. We conduct welfare analyses different from the conventional cost-benefit analysis, in which we distinguish between the direct welfare effect based on consumer surplus in the transport market and the indirect welfare effect through changes in regional unemployment, which is captured in the economy-wide effect. In our model, infrastructure improvement may increase unemployment in one region, but overall unemployment levels fall. The indirect welfare effects through decreases in overall unemployment are about 10-20% of the direct welfare effects for most plausible labor market parameters. The indirect welfare effects are larger, the poorer the initial transport infrastructure and the larger the labor market imperfections.
Volume (Year): 43 (2009)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/548/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, July.
- Ninette Pilegaard & Mogens Fosgerau, 2008.
"Cost Benefit Analysis of a Transport Improvement in the Case of Search Unemployment,"
Journal of Transport Economics and Policy,
University of Bath, vol. 42(1), pages 23-42, January.
- Pilegaard, Ninette & Fosgerau, Mogens, 2008. "Cost benefit-analysis of a transport improvement in the case of search unemployment," MPRA Paper 10037, University Library of Munich, Germany.
- Bovenberg, A. Lans & Graafland, Johan J. & de Mooij, Ruud A., 2000. "Tax reform and the Dutch labor market: an applied general equilibrium approach," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 193-214, October.
- Bovenberg, A Lans & de Mooij, Ruud A & Graafland, Johan J, 1998. "Tax Reform and the Dutch Labour Market: An Applied General Equilibrium Approach," CEPR Discussion Papers 1983, C.E.P.R. Discussion Papers.
- Bovenberg, A.L. & Graafland, J.J. & de Mooij, R.A., 2000. "Tax reform and the Dutch labour market : An applied general equilibrium approach," Other publications TiSEM a22f887a-ce1a-4aa2-ad01-6, Tilburg University, School of Economics and Management.
- A. Lans Bovenberg & Johan J. Graafland & Ruud A. de Mooij, 1998. "Tax Reform and the Dutch Labor Market: An Applied General Equilibrium Approach," NBER Working Papers 6693, National Bureau of Economic Research, Inc.
- Zenou, Yves, 2000. "Urban unemployment, agglomeration and transportation policies," Journal of Public Economics, Elsevier, vol. 77(1), pages 97-133, July.
- Zenou, Yves, 1999. "Urban Unemployment, Agglomeration and Transportation Policies," CEPR Discussion Papers 2309, C.E.P.R. Discussion Papers.
- Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
- Lawrence H. Summers, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
- Victor Ginsburgh & Michiel Keyzer, 2002. "The Structure of Applied General Equilibrium Models," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571579, July.
- Victor Ginsburgh & Michiel Keyzer, 1997. "The structure of applied general equilibrium models," ULB Institutional Repository 2013/1653, ULB -- Universite Libre de Bruxelles.
- Victor Ginsburgh & Michiel Keyzer, 2002. "The structure of applied general equilibrium models," ULB Institutional Repository 2013/3313, ULB -- Universite Libre de Bruxelles.
- Johannes Bröcker & Martin Schneider, 2002. "How Does Economic Development in Eastern Europe Affect Austria's Regions? A Multiregional General Equilibrium Framework," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 257-285.
- Bröcker, Johannes & Schneider, Martin, 1999. "How does economic development in eastern Europe affect Austria's regions? A multiregional general equilibrium framework," Discussion Papers 1/99, Technische Universität Dresden, "Friedrich List" Faculty of Transport and Traffic Sciences, Institute of Transport and Economics.
- David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
- David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
- Anthony J. Venables, 2007. "Evaluating Urban Transport Improvements: Cost-Benefit Analysis in the Presence of Agglomeration and Income Taxation," Journal of Transport Economics and Policy, University of Bath, vol. 41(2), pages 173-188, May.
- Tony Venables, 2004. "Evaluating urban transport improvements: cost benefit analysis in the presence of agglomeration and income taxation," LSE Research Online Documents on Economics 2205, London School of Economics and Political Science, LSE Library.
- Anthony J. Venables, 2004. "Evaluating Urban Transport Improvements: Cost Benefit Analysis in the Presence of Agglomeration and Income Taxation," CEP Discussion Papers dp0651, Centre for Economic Performance, LSE.
- Jones, Rich & Whalley, John, 1989. "A Canadian regional general equilibrium model and some applications," Journal of Urban Economics, Elsevier, vol. 25(3), pages 368-404, May.
- Calvo, Guillermo, 1979. "Quasi-Walrasian Theories of Unemployment," American Economic Review, American Economic Association, vol. 69(2), pages 102-107, May.
- Dasgupta, Partha & Ray, Debraj, 1986. "Inequality as a Determinant of Malnutrition and Unemployment: Theory," Economic Journal, Royal Economic Society, vol. 96(384), pages 1011-1034, December.
- Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
- Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
- Goerke, Laszlo, 2000. "On the structure of unemployment benefits in shirking models," Labour Economics, Elsevier, vol. 7(3), pages 283-295, May. Full references (including those not matched with items on IDEAS)