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Does City Structure Affect Job Search and Welfare?

Author

Listed:
  • Etienne Wasmer

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Yves Zenou

    (IFN - Research Institute of Industrial Economics)

Abstract

We develop a model in which workers' search efficiency is negatively affected by access to jobs. Workers' location in a city is endogenous and reflects a trade-off between commuting costs and the surplus associated with search. Different configurations emerge in equilibrium; notably, the unemployed workers may reside far away (segregated city) or close to jobs (integrated city). We prove that there exists a unique and stable market equilibrium in which both land and labor markets are solved for simultaneously. We find that, despite inefficient search in the segregated city equilibrium, the welfare difference between the two equilibria is not so large due to differences in commuting costs. We also show how a social planner can manipulate wages by subsidizing/taxing the transport costs and can accordingly restore the efficiency.

Suggested Citation

  • Etienne Wasmer & Yves Zenou, 2002. "Does City Structure Affect Job Search and Welfare?," Sciences Po Economics Publications (main) hal-03588618, HAL.
    • Handle: RePEc:hal:spmain:hal-03588618
    DOI: 10.1006/juec.2001.2256
    as

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