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Equilibrium Search Unemployment with Explicit Spatial Frictions

  • Wasmer, Etienne

    ()

    (Sciences Po, Paris)

  • Zenou, Yves

    ()

    (Stockholm University)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1465.

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Length: 31 pages
Date of creation: Jan 2005
Date of revision:
Publication status: published in: Labour Economics, 2006, 13 (2), 143-165
Handle: RePEc:iza:izadps:dp1465
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  1. Holzer, Harry J, 1988. "Search Method Use by Unemployed Youth," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 1-20, January.
  2. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455.
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  4. 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.
  5. Heikki Kauppi & Markus Haavio, 2003. "Housing Markets and Labor Mobility," Computing in Economics and Finance 2003 164, Society for Computational Economics.
  6. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  7. Zenou, Yves, 2002. "How Do Firms Redline Workers?," IZA Discussion Papers 607, Institute for the Study of Labor (IZA).
  8. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
  9. Smith, Tony E & Zenou, Yves, 1997. "Dual Labour Markets, Urban Unemployment and Multicentric Cities," CEPR Discussion Papers 1566, C.E.P.R. Discussion Papers.
  10. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
  11. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  12. 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.
  13. Smith, Tony E & Zenou, Yves, 2003. "Spatial Mismatch, Search Effort and Urban Spatial Structure," CEPR Discussion Papers 3731, C.E.P.R. Discussion Papers.
  14. 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.
  15. Jan K. Brueckner & Yves Zenou, 2003. "Space and Unemployment: The Labor-Market Effects of Spatial Mismatch," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 242-262, January.
  16. 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.
  17. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 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. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  20. Harry J. Holzer, 1986. "Informal Job Search and Black Youth Unemployment," NBER Working Papers 1860, National Bureau of Economic Research, Inc.
  21. 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.
  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. 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.
  24. Marston, Stephen T, 1985. "Two Views of the Geographic Distribution of Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 57-79, February.
  25. 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.
  26. P. Diamond, 1980. "Mobility Costs, Frictional Unemployment and Efficiency," Working papers 257, Massachusetts Institute of Technology (MIT), Department of Economics.
  27. Seater, John J, 1979. "Job Search and Vacancy Contacts," American Economic Review, American Economic Association, vol. 69(3), pages 411-19, June.
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