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Monocentric cities, endogenous agglomeration, and unemployment disparities

  • Zierahn, Ulrich

The literature on the wage curve provides considerable evidence in favor of a negative relationship between unemployment and wages. It is thus often seen as a refutation of the Harris-Todaro model, who point to a positive relationship. This paper shows that both strands of literature are special cases of a more general approach by combining a New Economic Geography model with monocentric cities and efficiency wages. Whether the relationship is positive or negative depends on the transportation costs between the cities and commuting costs within them. The model helps explain whether and under which conditions the agglomeration of economic activity is associated with higher unemployment and why controls for agglomeration should be included in wage curve regressions.

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Paper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 130.

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Date of creation: 2012
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Handle: RePEc:zbw:hwwirp:130
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  1. Helpman, Elhanan & Itskhoki, Oleg & Redding, Stephen J., 2011. "Trade and Labor Market Outcomes," CEPR Discussion Papers 8191, C.E.P.R. Discussion Papers.
  2. Picard, Pierre M. & Toulemonde, Eric, 2006. "Firms agglomeration and unions," European Economic Review, Elsevier, vol. 50(3), pages 669-694, April.
  3. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  4. Takatoshi Tabuchi & Jacques-Francois Thisse, 2003. "Regional Specialization, Urban Hierarchy, and Commuting Costs," CIRJE F-Series CIRJE-F-223, CIRJE, Faculty of Economics, University of Tokyo.
  5. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
  6. Isabelle Méjean & Lise Patureau, 2007. "Location Decisions and Minimum Wages," Working Papers 2007-16, CEPII research center.
  7. Zierahn, Ulrich, 2011. "Agglomeration, congestion, and regional unemployment disparities," HWWI Research Papers 108, Hamburg Institute of International Economics (HWWI).
  8. Campbell, Carl & Orszag, J. Michael, 1998. "A model of the wage curve," Economics Letters, Elsevier, vol. 59(1), pages 119-125, April.
  9. Murata, Yasusada & Thisse, Jacques-François, 2005. "A Simple Model of Economic Geography à la Helpman-Tabuchi," CEPR Discussion Papers 4936, C.E.P.R. Discussion Papers.
  10. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  11. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  12. Tabuchi, Takatoshi, 1998. "Urban Agglomeration and Dispersion: A Synthesis of Alonso and Krugman," Journal of Urban Economics, Elsevier, vol. 44(3), pages 333-351, November.
  13. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, 07.
  14. Cavailhes, Jean & Gaigne, Carl & Tabuchi, Takatoshi & Thisse, Jacques-Francois, 2007. "Trade and the structure of cities," Journal of Urban Economics, Elsevier, vol. 62(3), pages 383-404, November.
  15. Sato, Yasuhiro, 2000. "Search theory and the wage curve," Economics Letters, Elsevier, vol. 66(1), pages 93-98, January.
  16. Daniel Heuermann & Benedikt Halfdanarson & Jens Suedekum, 2010. "Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations," Urban Studies, Urban Studies Journal Limited, vol. 47(4), pages 749-767, April.
  17. Blanchflower, David G. & Oswald, Andrew J., 2005. "The Wage Curve Reloaded," IZA Discussion Papers 1665, Institute for the Study of Labor (IZA).
  18. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2012. "A dynamic spatial panel data approach to the German wage curve," Economic Modelling, Elsevier, vol. 29(1), pages 12-21.
  19. Partridge, Mark D. & Rickman, Dan S., 1997. "Has the wage curve nullified the Harris-Todaro model? Further US evidence," Economics Letters, Elsevier, vol. 54(3), pages 277-282, July.
  20. John Francis, 2007. "Asymmetries in regional labor markets, migration and economic geography," The Annals of Regional Science, Springer, vol. 41(1), pages 125-143, March.
  21. Hans-Friedrich Eckey & Reinhold Kosfeld & Alexander Werner, 2008. "Die Lohnkurve in Deutschland unter Berücksichtigung des regionalen Preisniveaus," MAGKS Papers on Economics 200810, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  22. 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.
  23. repec:cup:cbooks:9780521698221 is not listed on IDEAS
  24. repec:cup:cbooks:9780521875387 is not listed on IDEAS
  25. Strauss-Kahn, Vanessa, 2005. "Firms' location decision across asymmetric countries and employment inequality," European Economic Review, Elsevier, vol. 49(2), pages 299-320, February.
  26. Peter Egger & Tobias Seidel, 2008. "Agglomeration and fair wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 271-291, February.
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