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Land development, search frictions, and city structure

Author

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  • Yasuhiro Sato

    () (Graduate School of Economics, Osaka University)

  • Wei Xiao

    () (Department of Economics, Stockholm University)

Abstract

This paper analyzes the interactions between labor and housing (and land) markets in a city. We develop a monocentric city model involving land development and frictional unemployment. Unemployment, the spatial structure of a city, land development, housing demand, prices of housing and land are all endogenously determined in the model. We then characterize two different spatial configurations, spatial mismatch equilibrium in which unemployed workers are located far from jobs and integrated equilibrium in which unemployed workers live in areas close to jobs. To better understand how two equilibria are affected by labor market parameters, such as search intensity, wage, job finding rate, job destruction rate, and so on, we implement a comparative steady state analysis. We further explored the effects of policies such as a tax on land development to subsidize residents, a subsidy to reduce residents f commuting costs, and a subsidy to improve unemployed workers f benefits.

Suggested Citation

  • Yasuhiro Sato & Wei Xiao, 2013. "Land development, search frictions, and city structure," Discussion Papers in Economics and Business 13-12, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:1312
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1312.pdf
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    References listed on IDEAS

    as
    1. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521698221, March.
    2. Wei Xiao, 2014. "Search Frictions, Unemployment, And Housing In Cities: Theory And Policies," Journal of Regional Science, Wiley Blackwell, vol. 54(3), pages 422-449, June.
    3. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens, 2010. "Housing Externalities," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 485-535, June.
    4. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, March.
    5. Holzer, Harry J. & Reaser, Jess, 2000. "Black Applicants, Black Employees, and Urban Labor Market Policy," Journal of Urban Economics, Elsevier, vol. 48(3), pages 365-387, November.
    6. 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.
    7. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
    8. Ihlanfeldt, Keith R., 1997. "Information on the Spatial Distribution of Job Opportunities within Metropolitan Areas," Journal of Urban Economics, Elsevier, vol. 41(2), pages 218-242, March.
    9. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    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. Anderson John E., 1993. "Land Development, Externalities, and Pigouvian Taxes," Journal of Urban Economics, Elsevier, vol. 33(1), pages 1-9, January.
    12. 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 949-972, October.
    13. 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.
    14. 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.
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    Cited by:

    1. Huang, Daisy J. & Leung, Charles Ka Yui & Tse, Chung-Yi, 2017. "What account for the differences in rent-price ratio and turnover rate? A search-and-matching approach," MPRA Paper 76864, University Library of Munich, Germany.

    More about this item

    Keywords

    Land development; City structure; Search frictions; Spatial mismatch;

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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