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Urban Labour Economic Theory

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  • Zenou, Yves

Abstract

In this Paper survey some recent developments in urban labour economic theory. We first present a benchmark model in which firms set efficiency wages to prevent shirking and to compensate workers for commuting. We show that both wages and unemployment depend on commuting costs, and that housing prices as well as location are based on workers’ wages. We then extend the benchmark model in two different directions. First, by assuming that workers’ effort depends on distance to jobs, we show how firms draw a red line beyond which they do not hire workers. Second, by introducing high relocation costs so that workers do not change residence as soon as they change employment status, we show that efficiency wages now depend on distance to jobs. Finally, we use these theoretical models to give some microfoundations of a well-known stylized relationship: the spatial mismatch between residential location and workplace.

Suggested Citation

  • Zenou, Yves, 2003. "Urban Labour Economic Theory," CEPR Discussion Papers 4029, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4029
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    References listed on IDEAS

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    1. Jan K. Brueckner & Yves Zenou, 2003. "Space and Unemployment: The Labor-Market Effects of Spatial Mismatch," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 242-262, January.
    2. Zenou, Yves, 2002. "How do firms redline workers?," Journal of Urban Economics, Elsevier, vol. 52(3), pages 391-408, November.
    3. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, April.
    4. Zenou, Yves, 2006. "Efficiency wages and unemployment in cities: The case of high-relocation costs," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 49-71, January.
    5. Zenou, Yves & Smith, Tony E., 1995. "Efficiency wages, involuntary unemployment and urban spatial structure," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 547-573, August.
    6. 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.
    7. Wasmer, Etienne & Zenou, Yves, 2002. "Does City Structure Affect Job Search and Welfare?," Journal of Urban Economics, Elsevier, vol. 51(3), pages 515-541, May.
    8. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
    9. Harry J. Holzer, 1991. "The Spatial Mismatch Hypothesis: What Has the Evidence Shown?," Urban Studies, Urban Studies Journal Limited, vol. 28(1), pages 105-122, February.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Zenou, Yves, 2007. "Social Interactions and Labour Market Outcomes in Cities," CEPR Discussion Papers 6129, C.E.P.R. Discussion Papers.
    2. Zenou, Yves, 2003. "Efficiency Wages, Urban Unemployment and Housing Consumption," Working Paper Series 606, Research Institute of Industrial Economics.
    3. Song, Yan & Zenou, Yves, 2006. "Property tax and urban sprawl: Theory and implications for US cities," Journal of Urban Economics, Elsevier, vol. 60(3), pages 519-534, November.
    4. Giorgio Brunello & Francesca Gambarotto, 2004. "Agglomeration Effects on Employer-Provided Training: Evidence from the UK," CESifo Working Paper Series 1150, CESifo Group Munich.
    5. Zenou, Yves, 2009. "Search in cities," European Economic Review, Elsevier, vol. 53(6), pages 607-624, August.

    More about this item

    Keywords

    commuting; efficiency wages; land rent; spatial mismatch;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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