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Search unemployment and new economic geography

  • Philipp vom Berge

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    This paper develops a general equilibrium geographical economics model, which uses matching frictions on the labor market to generate regional unemployment disparities alongside the usual core-periphery pattern of industrial agglomeration. In the model, regional wage differentials do not only influence migration decisions of mobile workers, but also affect the bargaining process on local labor markets, leading to differences in vacancies and unemployment as well. In a setting with two regions, both higher or lower unemployment rates in the core region are possible equilibrium outcomes, depending on transport costs and the elasticity of substitution. Stylized facts suggest that both patterns are of empirical relevance. Copyright Springer-Verlag 2013

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    File URL: http://hdl.handle.net/10.1007/s00168-012-0535-z
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    Article provided by Springer in its journal The Annals of Regional Science.

    Volume (Year): 50 (2013)
    Issue (Month): 3 (June)
    Pages: 731-751

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    Handle: RePEc:spr:anresc:v:50:y:2013:i:3:p:731-751
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    1. John Francis, 2003. "The declining costs of international trade and unemployment," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 337-357.
    2. Sato, Yasuhiro, 2000. "Search theory and the wage curve," Economics Letters, Elsevier, vol. 66(1), pages 93-98, January.
    3. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 437-466.
    4. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
    5. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
    6. Möller, Joachim & Haas, Anette, 2002. "The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997," ERSA conference papers ersa02p327, European Regional Science Association.
    7. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
    8. Venables, Anthony J, 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
    9. Picard, Pierre M & Toulemonde, Eric, 2002. "Firms Agglomeration and Unions," CEPR Discussion Papers 3323, C.E.P.R. Discussion Papers.
    10. Picard, Pierre M. & Toulemonde, Eric, 2001. "The Impact of Labor Markets on Emergence and Persistence of Regional Asymmetries," IZA Discussion Papers 248, Institute for the Study of Labor (IZA).
    11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    12. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
    13. Ziesemer,Thomas, 2001. "Monopolistic Competition and Search Unemployment: A Pissarides-Dixit-Stiglitz model," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    14. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
    15. Tabuchi, Takatoshi, 1998. "Urban Agglomeration and Dispersion: A Synthesis of Alonso and Krugman," Journal of Urban Economics, Elsevier, vol. 44(3), pages 333-351, November.
    16. J. Paul Elhorst, 2003. "The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations," Journal of Economic Surveys, Wiley Blackwell, vol. 17(5), pages 709-748, December.
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