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How Urbanization Affect Employment and Social Interactions

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Listed author(s):
  • Sato, Yasuhiro
  • Zenou, Yves

Abstract

We develop a model where the unemployed workers in the city can find a job either directly or through weak or strong ties. We show that, in denser areas, individuals choose to interact with more people and meet more random encounters (weak ties) than in sparsely populated areas. We also demonstrate that, for a low urbanization level, there is a unique steady-state equilibrium where workers do not interact with weak ties, while, for a high level of urbanization, there is a unique steady-state equilibrium with full social interactions. We show that these equilibria are usually not socially efficient when the urban population has an intermediate size because there are too few social interactions compared to the social optimum. Finally, even when social interactions are optimal, we show that there is over-urbanization in equilibrium.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9805.

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Date of creation: Feb 2014
Handle: RePEc:cpr:ceprdp:9805
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Keywords: labor market.; social interactions; strong ties; urban economics; Weak ties;

Other versions of this item:

Find related papers by JEL classification:
  • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
  • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
  • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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Cited by:

  1. Kawata, Keisuke & Nakajima, Kentaro & Sato, Yasuhiro, 2016. "Multi-region job search with moving costs," Regional Science and Urban Economics, Elsevier, vol. 61(C), pages 114-129.
  2. Gaigné, Carl & Zenou, Yves, 2015. "Agglomeration, city size and crime," European Economic Review, Elsevier, vol. 80(C), pages 62-82.
  3. Yoske Igarashi, 2016. "Distributional effects of hiring through networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 90-110, April.
  4. Topa, Giorgio & Zenou, Yves, 2015. "Neighborhood and Network Effects," Handbook of Regional and Urban Economics, Elsevier.
  5. Bervoets, Sebastian & Zenou, Yves, 2017. "Intergenerational correlation and social interactions in education," European Economic Review, Elsevier, vol. 92(C), pages 13-30.
  6. Hailiang Ma & Nan-Ting Chou & Lei Wang, 2016. "Dynamic Coupling Analysis of Urbanization and Water Resource Utilization Systems in China," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-18, November.

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