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Equilibrium Search Unemployment with Explicit Spatial Frictions

  • Wasmer, Etienne

    (University du Quebec a Montreal)

  • Zenou, Yves


    (The Research Institute of Industrial Economics)

Assuming that job search efficiency decreases with distance to jobs, workers' location in a city depends on spatial elements such as commuting costs and land prices and on labour elements such as wages and the matching technology. In the absence of moving costs, we show that there exists a unique equilibrium in which employed and unemployed workers are perfectly segregated but move at each employment transition. We investigate the interactions between the land and the labour market equilibrium and show under which condition they are interdependent. When relocation costs become positive, a new zone appears in which both the employed and the unemployed co-exist and are not mobile. We demonstrate that the size of this area goes continuously to zero when moving costs vanish. Finally, we endogeneize search effort, show that it negatively depends on distance to jobs and that long and short-term unemployed workers coexist and locate in different areas of the city.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 615.

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Length: 29 pages
Date of creation: 16 Mar 2004
Date of revision:
Handle: RePEc:hhs:iuiwop:0615
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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  1. Zenou, Yves, 2002. "How do firms redline workers?," Journal of Urban Economics, Elsevier, vol. 52(3), pages 391-408, November.
  2. Seater, John J, 1979. "Job Search and Vacancy Contacts," American Economic Review, American Economic Association, vol. 69(3), pages 411-19, June.
  3. Ihlanfeldt, Keith R & Sjoquist, David L, 1990. "Job Accessibility and Racial Differences in Youth Employment Rates," American Economic Review, American Economic Association, vol. 80(1), pages 267-76, March.
  4. Fujita,Masahisa, 1989. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521346627.
  5. Smith, Tony E. & Zenou, Yves, 2003. "Spatial mismatch, search effort, and urban spatial structure," Journal of Urban Economics, Elsevier, vol. 54(1), pages 129-156, July.
  6. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  7. Brueckner, Jan & Zenou, Yves, 2000. "Space And Unemployment: The Labour-Market Effects Of Spatial Mismatch," CEPR Discussion Papers 2397, C.E.P.R. Discussion Papers.
  8. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  9. Smith, T. E. & Zenou, Y., . "Dual labor markets, urban unemployment, and multicentric cities," CORE Discussion Papers RP 1283, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Holzer, Harry J, 1987. "Informal Job Search and Black Youth Unemployment," American Economic Review, American Economic Association, vol. 77(3), pages 446-52, June.
  11. repec:oup:restud:v:68:y:2001:i:2:p:261-95 is not listed on IDEAS
  12. Harry J. Holzer, 1986. "Search Method Use by Unemployed Youth," NBER Working Papers 1859, National Bureau of Economic Research, Inc.
  13. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  14. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
  15. van Ommeren, Jos & Rietveld, Piet & Nijkamp, Peter, 1997. "Commuting: In Search of Jobs and Residences," Journal of Urban Economics, Elsevier, vol. 42(3), pages 402-421, November.
  16. P. Diamond, 1980. "Mobility Costs, Frictional Unemployment and Efficiency," Working papers 257, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. Brueckner, Jan K., 1987. "The structure of urban equilibria: A unified treatment of the muth-mills model," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 20, pages 821-845 Elsevier.
  18. Zax, Jeffrey S & Kain, John F, 1996. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 472-504, July.
  19. Heikki Kauppi & Markus Haavio, 2003. "Housing Markets and Labor Mobility," Computing in Economics and Finance 2003 164, Society for Computational Economics.
  20. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
  21. repec:oup:qjecon:v:100:y:1985:i:1:p:57-79 is not listed on IDEAS
  22. Crampton, Graham R., 1999. "Urban labour markets," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 39, pages 1499-1557 Elsevier.
  23. 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.
  24. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  25. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
  26. Rogers, Cynthia L., 1997. "Job Search and Unemployment Duration: Implications for the Spatial Mismatch Hypothesis," Journal of Urban Economics, Elsevier, vol. 42(1), pages 109-132, July.
  27. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
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