Urban Unemployment, Agglomeration and Transportation Policies

Yves Zenou

No 2309, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the role of unemployment in the context of the endogeneous formation of a monocentric city in which firms set efficiency wages to deter shirking. We first show that, in equilibrium, the employed locate at the vicinity of the city-centre, the unemployed reside at the city-edge and firms set up in the city-centre. We then show that there is a `spatial mismatch' between location and jobs because the further away from jobs the unemployed, the larger the level of unemployment. Finally, we derive some policy implications. We show that a policy that improves the city transportation network (by subsidizing the commuting costs of all workers) reduces urban unemployment, increasing utilities of all workers but also raising inequality, whereas a policy that supports the transportation of the unemployed only (by subsidizing their commuting costs) increases urban unemployment, not always raising workers' utilities, but reducing inequality.

Keywords: Efficiency Wages; Endogenous Location Of Workers And Firms; Spatial Mismatch; Subsidizing Commuting Costs; Urban Unemployment (search for similar items in EconPapers)
JEL-codes: J64 R14 (search for similar items in EconPapers)
Date: 1999-12
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Citations: View citations in EconPapers (6)

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Journal Article: Urban unemployment, agglomeration and transportation policies (2000)
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