Spatial Equilibrium with Unemployment and Wage Bargaining: Theory and Estimation

Paul Beaudry, David Green and Benjamin Sand ()

No 19118, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we present a spatial equilibrium model where search frictions hinder the immediate reallocation of workers both within and across local labour markets. Because of the frictions, firms and workers find themselves in bilateral monopoly positions when determining wages. Although workers are not at each instant perfectly mobile across cities, in the baseline model we assume that workers flows are sufficient to equate expected utility across markets. We use the model to explore the joint determination of wages, unemployment, house prices and city size (or migration). A key role of the model is to clarify conditions under which this type of spatial equilibrium setup can be estimated. We then use U.S. data over the period 1970-2007 to explore the fit of model and it quantitative properties of the model. Our main goal is to highlight forces that influence spatial equilibria at 10 year intervals.

JEL-codes: J01 J2 J3 J6 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-dge, nep-lab and nep-ure
Note: EFG LS
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Citations: View citations in EconPapers (2)

Published as Beaudry, Paul & Green, David A. & Sand, Benjamin M., 2014. "Spatial equilibrium with unemployment and wage bargaining: Theory and estimation," Journal of Urban Economics, Elsevier, vol. 79(C), pages 2-19.

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Journal Article: Spatial equilibrium with unemployment and wage bargaining: Theory and estimation (2014)
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