Dual Labor Markets, Urban Unemployment and Multicentric Cities

Tony E. Smith and Yves Zenou
Additional contact information
Tony E. Smith: Department of Systems, University of Pennsylvania, Philadelphia

No 1996018, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: A two-sector model of urban unemployment is developed which focuses on the formation of a secondary sector under conditions in which a demand shock in the primary sector leads to a sharp increase in unemployment. The optimal location in the secondary sector (treated as a single firm) is shown to be at the edge of the city, giving rise to a multicentric urban spatial structure. Within this spatial setting, the main result of the paper is to establish conditions under which the new labor market equilibrium involves not only a decrease in unemployment, but also an increase in net income for those unemployed. These results are extended to the case in which all unemployment benefits are financed by local taxation of firms. In this context, it is shown that when taxation discourages entry of a secondary sector, there may be profit incentives for the primary sector to subsidize the entry of a secondary sector.

Keywords: Efficiency wage; minimum wage; edge city; local taxation (search for similar items in EconPapers)
JEL-codes: J41 R14 (search for similar items in EconPapers)
Date: 1996-05-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Dual Labor Markets, Urban Unemployment, and Multicentric Cities (1997)
Working Paper: Dual labor markets, urban unemployment, and multicentric cities (1997)
Working Paper: Dual Labour Markets, Urban Unemployment and Multicentric Cities (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1996018

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