2006–2010

Equilibrium Search Unemployment with Explicit Spatial Frictions

Reprint No. 2006:4

Author(s): Etienne Wasmer and Yves Zenou.Year: 2006 Title: Labour Economics Volume (No.): 13 (2) Pages: 143–165


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.


Reference:
Wasmer, Etienne and Yves Zenou. (2006), "Equilibrium Search Unemployment with Explicit Spatial Frictions". Labour Economics 13(2), 143–165.

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

About the book

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