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SEARCH FRICTIONS, UNEMPLOYMENT, AND HOUSING IN CITIES: THEORY AND POLICIES

Wei Xiao

Journal of Regional Science, 2014, vol. 54, issue 3, 422-449

Abstract: type="main">

We propose an urban search-matching model with land development. Wages, unemployment, prices of housing and land are endogenously determined. We characterize the steady-state equilibrium and then discuss the issue of efficiency. To explore interactions among markets, we implement comparative static analysis. We also consider three policies: an entry-cost policy that reduces firms' entry, a transportation policy that reduces commuting costs, and a housing policy that decreases rental prices. We find that the transportation and housing policies are more efficient if the unemployment rate is low, while the entry-cost policy is more efficient if the unemployment rate is high.

Date: 2014
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Journal of Regional Science is currently edited by Marlon G. Boarnet, Matthew Kahn and Mark D. Partridge

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