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Agglomeration, Congestion, and Regional Unemployment Disparities

  • Ulrich Zierahn

    (University of Kassel)

Regional labor markets are characterized by huge disparities of unemployment rates. Models of the New Economic Geography explain how disparities of regional goods markets endogenously arise but usually assume full employment. This paper discusses regional unemployment disparities by introducing a wage curve based on efficiency wages into the New Economic Geography. The model shows how disparities of regional goods and labor markets endogenously arise through the interplay of increasing returns to scale, transport costs, congestion costs, and migration. In result, the agglomeration pattern might be catastrophic or smooth depending on congestion costs. The transition between both patterns is smooth.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/06-2011_zierahn.pdf
File Function: First version, 2011
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201106.

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Length: 31 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201106
Contact details of provider: Postal: Universitätsstraße 25, 35037 Marburg
Phone: 06421/28-1722
Fax: 06421/28-4858
Web page: http://www.uni-marburg.de/fb02/
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