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Efficiency Wages, Involuntary Unemployment and Urban Spatial Structure

Author

Listed:
  • ZENOU, Yves

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium and Université Panthéon-Assas, Paris)

  • SMITH, Tony E.

    (Regional Science Graduate Group, University of Pennsylvania, Philadelphia)

Abstract

The labor market model is developed within an urban spatial context, where it is shown that effeciency-wage policies can lead to significant levels of involuntary unemployment. Commuting cost differences between workers and nonworkers tend to increase unemployment, and competition for land tends to segregate workers and non-workers, with nonworkers relegated to the urban fringe. These findings are extended to a two-city system, where it is shown that even with free mobility of workers, significant wage and unemployment differentials can exist between cities characterized by different levels of productivity.

Suggested Citation

  • ZENOU, Yves & SMITH, Tony E., 1994. "Efficiency Wages, Involuntary Unemployment and Urban Spatial Structure," LIDAM Discussion Papers CORE 1994076, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1994076
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    Keywords

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    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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