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Regional unemployment and new economic geography

  • Zierahn, Ulrich

Regional labor markets are characterized by huge disparities. The literature on the wage curve argues that there exists a negative relationship between unemployment and wages. However, this literature cannot explain how disparities of these variables between regions endogenously arise. In contrast, the New Economic Geography analyzes how disparities of regional goods markets endogenously arise, but usually ignores unemployment. Therefore, this paper discusses regional unemployment disparities by introducing efficiency wages into the New Economic Geography. This model shows how disparities of regional goods and labor markets endogenously arise through the interplay of increasing returns to scale, transport costs and migration.

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Paper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 105.

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Date of creation: 2011
Date of revision:
Handle: RePEc:zbw:hwwirp:105
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  1. Helge Sanner & Uwe Blien, 2006. "Structural Change and Regional Employment Dynamics," ERSA conference papers ersa06p699, European Regional Science Association.
  2. Michael Pflüger, 2004. "Economic integration, wage policies, and social policies," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 135-150, January.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
  5. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  6. Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-43, September.
  7. Zenou, Y. & Smith, T. E., . "Efficiency wages, involuntary unemployment and urban spatial structure," CORE Discussion Papers RP 1171, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Haaland, Jan I. & Wooton, Ian, 2003. "Domestic Labour Markets and Foreign Direct Investment," CEPR Discussion Papers 3989, C.E.P.R. Discussion Papers.
  9. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  10. Paolo Epifani & Gino Gancia, 2002. "Trade, migration and regional unemployment," Economics Working Papers 832, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2003.
  11. Gerda Dewit & Dermot Leahy & Catia Montagna, 2003. "Employment Protection and Globalisation in Dynamic Oligopoly," Dundee Discussion Papers in Economics 137, Economic Studies, University of Dundee.
  12. Ulrich Zierahn, 2013. "Agglomeration, congestion, and regional unemployment disparities," The Annals of Regional Science, Springer, vol. 51(2), pages 435-457, October.
  13. Antonio Ricci, Luca, 1999. "Economic geography and comparative advantage:: Agglomeration versus specialization," European Economic Review, Elsevier, vol. 43(2), pages 357-377, February.
  14. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  15. John Francis, 2009. "Agglomeration, job flows and unemployment," The Annals of Regional Science, Springer, vol. 43(1), pages 181-198, March.
  16. Picard, Pierre M & Toulemonde, Eric, 2002. "Firms Agglomeration and Unions," CEPR Discussion Papers 3323, C.E.P.R. Discussion Papers.
  17. Isabelle Méjean & Lise Patureau, 2007. "Location Decisions and Minimum Wages," Working Papers 2007-16, CEPII research center.
  18. repec:dgr:rugsom:00c06 is not listed on IDEAS
  19. Strauss-Kahn, Vanessa, 2005. "Firms' location decision across asymmetric countries and employment inequality," European Economic Review, Elsevier, vol. 49(2), pages 299-320, February.
  20. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  21. Peter Egger & Tobias Seidel, 2008. "Agglomeration and fair wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 271-291, February.
  22. Monfort, Philippe & Ottaviano, Gianmarco, 2002. "Spatial Mismatch and Skill Accumulation," CEPR Discussion Papers 3324, C.E.P.R. Discussion Papers.
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