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High-Relocation Costs in Search-Matching Models. Theory and Application to Spatial Mismatch
Stockholm University, Faculty of Social Sciences, Department of Economics.
2009 (English)In: Labour Economics, ISSN 0927-5371, Vol. 16, no 5, 534-546 p.Article in journal (Refereed) Published
Abstract [en]

We develop a standard search-matching model in which mobility costs are so high that it is

too costly for workers to relocate when a change in their employment status occurs. We show

that, in equilibrium, wages increase with distance to jobs and commuting costs because firms

need to compensate the transportation cost difference between the employed and

unemployed workers at each location in the city. We also show that the equilibrium land rent

is negatively affected by the unemployment benefit because an increase in the latter induce

firms to create less jobs, which, in turn, reduces the competition in the land market. We then

use this model to provide a mechanism for the observed spatial mismatch between where

black workers live and where jobs are. Because blacks and whites differ by their contact rate,

we show that the former reside far away from jobs, have higher unemployment rates and

lower wages. This is because the housing market amplifies the negative effects of the labor

market by creating additional frictions.

Place, publisher, year, edition, pages
2009. Vol. 16, no 5, 534-546 p.
Keyword [en]
search frictions, spatial frictions, efficiency, spatial mismatch hypothesis
URN: urn:nbn:se:su:diva-45032OAI: diva2:364718
Available from: 2010-11-09 Created: 2010-11-09 Last updated: 2011-07-06Bibliographically approved

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Zenou, Yves
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