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Local Labor Markets, Job Matching, and Urban Location

  • Jan K. Brueckner

    (University of Illinois at Urbana Champaign, U.S.A.)

  • Jacques-FranÁois Thisse

    (UniversitÈ Catholique de Louvain, Belgium and Ecole Nationale des Ponts et Chaussees, France)

  • Yves Zenou

    (University of Southampton, United Kingdom)

We present a new way of modeling local labor markets by linking the space of workers' skills and the physical space of cities. The key lesson of our analysis is that firms exploit workers in these two spaces by setting wages that are below the competitive level. The degree of monopsony power depends on the elasticity of the firm's labor pool, which is inversely related to the costs workers incur in commuting and acquiring skills. Our analysis thus shows how socioeconomic ghettos emerge as workers with poor skill matches are also those who incur the highest commuting costs. Copyright 2002 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Resarch Association

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 43 (2002)
Issue (Month): 1 (February)
Pages: 155-171

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Handle: RePEc:ier:iecrev:v:43:y:2002:i:1:p:155-171
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