Urban Spatial Structure, Employment and Social Ties

Consider a model where workers from the majority and the minority group choose both their residential location (geographical space) and the intensity of their social interactions (social space). We demonstrate under which condition one group resides close to the job center while the other lives far away from it. Even though the two groups have the same characteristics and there is no discrimination in the housing or labor market, we show that the majority group can have a lower unemployment rate whenever it resides close to or far away from the workplace. This is because this group generates a larger and better-quality social network.