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Search, Wage Posting, and Urban Spatial Structure

  • Zenou, Yves

    ()

    (Dept. of Economics, Stockholm University)

We develop an urban-search model in which firms post wages. When all workers are identical, there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labor costs. When workers differ according to the value imputed to leisure, we show that, under some conditions, two wages emerge in equilibrium. The commuting cost affects the land market but also the labor market through wages. Workers’ productivity also affects housing prices and this impact can be positive or negative depending on the location in the city. We then run some numerical simulations to reproduce some stylized facts about the labor-market outcomes of black and white workers. We find that a reduction in commuting costs for all workers reduces the unemployment rate of white workers and the profit of all firms but increases the wage of all workers (black and white) and raises the fraction of firms posting the high wage.

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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:22.

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Length: 44 pages
Date of creation: 08 Nov 2010
Date of revision:
Handle: RePEc:hhs:sunrpe:2010_0022
Contact details of provider: Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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  1. Brueckner, J.K. & Thisse, J.-F. & Zenou, Y., 1996. "Why is central Paris rich and downtown Detroit poor ? An amenity-based theory," CORE Discussion Papers 1996065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
  3. Gaumont D. & Schindler M. & Wright R., 2005. "“Alternative Theories of Wage Dispersion”," Working Papers ERMES 0505, ERMES, University Paris 2.
  4. Rappaport, Jordan & Kahn, Matthew E. & Glaeser, Edward, 2008. "Why Do The Poor Live In Cities? The Role of Public Transportation," Scholarly Articles 2958224, Harvard University Department of Economics.
  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. Patacchini, Eleonora & Zenou, Yves, 2005. "Spatial mismatch, transport mode and search decisions in England," Journal of Urban Economics, Elsevier, vol. 58(1), pages 62-90, July.
  7. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, June.
  8. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  9. Wasmer, Etienne & Zenou, Yves, 2004. "Equilibrium Search Unemployment With Explicit Spatial Frictions," CEPR Discussion Papers 4743, C.E.P.R. Discussion Papers.
  10. Sato, Yasuhiro, 2004. "City structure, search, and workers' job acceptance behavior," Journal of Urban Economics, Elsevier, vol. 55(2), pages 350-370, March.
  11. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-40, October.
  12. Edward L. Glaeser & Matthew E. Kahn & Jordan Rappaport, 2000. "Why Do the Poor Live in Cities?," NBER Working Papers 7636, National Bureau of Economic Research, Inc.
  13. 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.
  14. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  15. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  16. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  18. Zenou, Yves, 2007. "Search in Cities," CEPR Discussion Papers 6197, C.E.P.R. Discussion Papers.
  19. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
  20. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  21. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  22. 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.
  23. Randall W. Eberts & Joe A. Stone, 1992. "Wage and Employment Adjustment in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wea, March.
  24. Holzer Harry J. & Ihlanfeldt Keith R. & Sjoquist David L., 1994. "Work, Search, and Travel among White and Black Youth," Journal of Urban Economics, Elsevier, vol. 35(3), pages 320-345, May.
  25. repec:cup:cbooks:9780521875387 is not listed on IDEAS
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