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Search Unemployment and New Economic Geography

  • vom Berge, Philipp


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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.

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    Paper provided by University of Regensburg, Department of Economics in its series University of Regensburg Working Papers in Business, Economics and Management Information Systems with number 454.

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    Date of creation: 28 Mar 2011
    Date of revision:
    Handle: RePEc:bay:rdwiwi:20304
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    1. 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).
    2. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
    3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    4. Epifani, Paolo & Gancia, Gino A., 2005. "Trade, migration and regional unemployment," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 625-644, November.
    5. Jens Suedekum, 2003. "Increasing Returns and Spatial Unemployment Disparities," ERSA conference papers ersa03p44, European Regional Science Association.
    6. Sato, Yasuhiro, 2000. "Search theory and the wage curve," Economics Letters, Elsevier, vol. 66(1), pages 93-98, January.
    7. 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.
    8. Picard, Pierre M. & Toulemonde, Eric, 2006. "Firms agglomeration and unions," European Economic Review, Elsevier, vol. 50(3), pages 669-694, April.
    9. 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.
    10. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    11. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
    12. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
    13. Jens Suedekum, 2006. "Agglomeration And Regional Costs Of Living," Journal of Regional Science, Wiley Blackwell, vol. 46(3), pages 529-543.
    14. 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.
    15. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    16. 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).
    17. Masaru Sasaki, 2007. "International migration in an equilibrium matching model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(1), pages 1-29.
    18. 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.
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