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Agglomeration, congestion, and regional unemployment disparities

  • Zierahn, Ulrich

Regional labor markets are characterized by huge disparities between unemployment rates. Models of the New Economic Geography explain how disparities between 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 between regional goods and labor markets endogenously arise through the interplay of increasing returns to scale, transport costs, congestion costs, and migration. The level and stability of regional labor market disparities depends on the extend of labor market frictions.

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Paper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 108.

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Date of creation: 2011
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Handle: RePEc:zbw:hwwirp:108
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  1. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
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  8. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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  11. Peter Nijkamp & Jacques Poot, 2002. "The Last Word on the Wage Curve?," Tinbergen Institute Discussion Papers 02-029/3, Tinbergen Institute, revised 13 Mar 2003.
  12. ZENOU, Yves & SMITH, Tony E., 1994. "Efficiency Wages, Involuntary Unemployment and Urban Spatial Structure," CORE Discussion Papers 1994076, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. 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.
  14. Michael Pflüger, 2004. "Economic integration, wage policies, and social policies," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 135-150, January.
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  18. John Francis, 2009. "Agglomeration, job flows and unemployment," The Annals of Regional Science, Springer, vol. 43(1), pages 181-198, March.
  19. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
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  22. Peter Egger & Tobias Seidel, 2008. "Agglomeration and fair wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 271-291, February.
  23. Campbell, Carl & Orszag, J. Michael, 1998. "A model of the wage curve," Economics Letters, Elsevier, vol. 59(1), pages 119-125, April.
  24. Zierahn, Ulrich, 2011. "Regional unemployment and new economic geography," HWWI Research Papers 105, Hamburg Institute of International Economics (HWWI).
  25. Eric Krassoi Peach & T. Stanley, 2009. "Efficiency Wages, Productivity and Simultaneity: A Meta-Regression Analysis," Journal of Labor Research, Springer, vol. 30(3), pages 262-268, September.
  26. Monfort, Philippe & Ottaviano, Gianmarco, 2002. "Spatial Mismatch and Skill Accumulation," CEPR Discussion Papers 3324, C.E.P.R. Discussion Papers.
  27. 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.
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  29. Blanchflower, David G. & Oswald, Andrew J., 2005. "The Wage Curve Reloaded," IZA Discussion Papers 1665, Institute for the Study of Labor (IZA).
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