Monocentric cities, endogenous agglomeration, and unemployment disparities
No 130, HWWI Research Papers from Hamburg Institute of International Economics (HWWI)
The literature on the wage curve provides considerable evidence in favor of a negative relationship between unemployment and wages. It is thus often seen as a refutation of the Harris-Todaro model, who point to a positive relationship. This paper shows that both strands of literature are special cases of a more general approach by combining a New Economic Geography model with monocentric cities and efficiency wages. Whether the relationship is positive or negative depends on the transportation costs between the cities and commuting costs within them. The model helps explain whether and under which conditions the agglomeration of economic activity is associated with higher unemployment and why controls for agglomeration should be included in wage curve regressions.
Keywords: New Economic Geography; Urban Economics; Efficiency Wages; Unemployment; Disparities; Regional Migration (search for similar items in EconPapers)
JEL-codes: R12 R14 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
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Working Paper: Monocentric Cities, Endogenous Agglomeration, and Unemployment Disparities (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hwwirp:130
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