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

Author

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  • Selod, Harris

    () (INTRA-LEA)

  • Zenou, Yves

    () (The Research Institute of Industrial Economics)

Abstract

We consider a search-matching model in which black workers are discriminated against and 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 for proximity to jobs. Because of coordination failures in the location choices, multiple urban equilibria emerge. There is a Spatial-Mismatch Equilibrium in which blacks reside far away from jobs and experience high unemployment rates and a Spatial-Match Equilibrium in which blacks are closer to jobs and experience lower unemployment rates. Under some reasonable condition, 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 firms which hire black workers. We show that the optimal policy requires imposing larger quotas or subsidies in cities in which black workers reside far away from jobs than in cities in which they live closer to jobs.

Suggested Citation

  • Selod, Harris & Zenou, Yves, 2004. "City Structure, Job Search, and Labor Discrimination. Theory and Policy Implications," Working Paper Series 620, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0620
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    References listed on IDEAS

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    More about this item

    Keywords

    Spatial Mismatch; Racial Preferences; Social Networks; Affirmative Action; Employment Subsidies;

    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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