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.
2009. Vol. 16, no 5, 534-546 p.
search frictions, spatial frictions, efficiency, spatial mismatch hypothesis