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Land development, search frictions, and city structure

  • Yasuhiro Sato


    (Graduate School of Economics, Osaka University)

  • Wei Xiao


    (Department of Economics, Stockholm University)

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 residentsf commuting costs, and a subsidy to improve unemployed workersf benefits.

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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 13-12.

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Length: 42 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:osk:wpaper:1312
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  1. Wheaton, William C., 1974. "A comparative static analysis of urban spatial structure," Journal of Economic Theory, Elsevier, vol. 9(2), pages 223-237, October.
  2. 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, 06.
  3. Sato, Yasuhiro, 2004. "City structure, search, and workers' job acceptance behavior," Journal of Urban Economics, Elsevier, vol. 55(2), pages 350-370, March.
  4. Anderson John E., 1993. "Land Development, Externalities, and Pigouvian Taxes," Journal of Urban Economics, Elsevier, vol. 33(1), pages 1-9, January.
  5. Fujita,Masahisa, 1989. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521346627.
  6. 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.
  7. Harry J. Holzer, . "Black Applicants, Black Employees, and Urban Labor Market Policy," Institute for Research on Poverty Discussion Papers 1162-98, University of Wisconsin Institute for Research on Poverty.
  8. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
  9. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521698221.
  10. 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.
  11. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  12. 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.
  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. Wheaton, William C., 1976. "On the optimal distribution of income among cities," Journal of Urban Economics, Elsevier, vol. 3(1), pages 31-44, January.
  15. 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.
  16. 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, 06.
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