Equilibrium Search Unemployment with Explicit Spatial Frictions

Etienne Wasmer and Yves Zenou

No 1465, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Assuming that job search efficiency decreases with distance to jobs, workers’ location in a city depends on spatial elements such as commuting costs and land prices and on labour elements such as wages and the matching technology. In the absence of moving costs, we show that there exists a unique equilibrium in which employed and unemployed workers are perfectly segregated but move at each employment transition. We investigate the interactions between the land and the labour market equilibrium and show under which condition they are interdependent. When relocation costs become positive, a new zone appears in which both the employed and the unemployed co-exist and are not mobile. We demonstrate that the size of this area goes continuously to zero when moving costs vanish. Finally, we endogeneize search effort, show that it negatively depends on distance to jobs and that long and short-term unemployed workers coexist and locate in different areas of the city.

Keywords: local labour markets; relocation costs; search effort; job matching (search for similar items in EconPapers)
JEL-codes: E24 J41 R14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-01
New Economics Papers: this item is included in nep-geo, nep-lab, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - published in: Labour Economics, 2006, 13 (2), 143-165

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Related works:
Journal Article: Equilibrium search unemployment with explicit spatial frictions (2006)
Working Paper: Equilibrium search unemployment with explicit spatial frictions (2006)
Working Paper: Equilibrium Search Unemployment With Explicit Spatial Frictions (2004)
Working Paper: Equilibrium Search Unemployment with Explicit Spatial Frictions (2004)
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