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City Structure, Job Search and Labor Discrimination. Theory and Policy Implications

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  • Harris Selod

    (Crest)

  • Yves Zenou

    (Crest)

Abstract

We consider a search-matching model in which black workers are discriminated againstand the job arrival rates of all workers depend on social networks as well as distance to jobs.Location choices are driven by the racial preferences of households (both blacks and whites)consciously choosing to trade off proximity to neighbors of similar racial backgrounds forproximity to jobs. Because of coordination failures in the location choices, multiple urbanequilibria emerge. There is a Spatial-Mismatch Equilibrium in which blacks reside far awayfrom jobs and experience high unemployment rates and a Spatial-Match Equilibrium in whichblacks are closer to jobs and experience lower unemployment rates. Under some reasonablecondition, we demonstrate that all workers are better off in the Spatial-Match Equilibrium.We then consider two policies: affirmative action, and employment subsidies to the firmswhich hire black workers. We show that the optimal policy requires imposing higher quotasin cities in which black workers reside far away from jobs than in cities in which they livecloser to jobs.

Suggested Citation

  • Harris Selod & Yves Zenou, 2004. "City Structure, Job Search and Labor Discrimination. Theory and Policy Implications," Working Papers 2004-13, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2004-13
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    More about this item

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • 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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