How do Firms Redline Workers?

Yves Zenou

No 3209, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In a city where individuals endogenously choose their residential location, firms determine their spatial efficiency wage and a geographical red line beyond which they do not recruit workers. This is because workers experiencing longer commuting trips provide lower effort levels than those residing closer to jobs. By solving simultaneously for the land and labour market equilibrium, we show that there exists a unique market equilibrium that determines the location of all individuals in the city, the land rent, the efficiency wage, the recruitment area and the unemployment level in the economy. This model is able to provide a new mechanism for the spatial mismatch hypothesis by taking the firm?s viewpoint. Distance to jobs is harmful not because workers have low information about jobs (search) or because commuting costs are too high but because firms do not hire remote workers.

Keywords: Distance to jobs; Efficiency wage; Recruitment area; Spatial mismatch (search for similar items in EconPapers)
JEL-codes: J41 R14 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (81)

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Journal Article: How do firms redline workers? (2002)
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