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Does city structure affect search and welfare?

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We develop a model in which workers' search efficiency is negatively affected by access to jobs. Workers' location in a city is endogenous and reflects a trade-off between commuting costs and the surplus associated with search. Different configurations emerge in equilibrium; notably, the unemployed workers may reside far away (segregated city) or close to jobs (integrated city). We prove that there exists a unique and stable market equilibrium in which both land and labor markets are solved for simultaneously. We find that, despite inefficient search in the segregated city equilibrium, the welfare difference between the two equilibria is not so large due to differences in commuting costs. We also show how a social planner can manipulate wages by subsidizing/taxing the transport costs and can accordingly restore the efficiency.

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Wasmer, Etienne and Zenou, Yves (2002) Does city structure affect search and welfare? Journal of Urban Economics, 51, (3), pp. 515-541. (doi:10.1006/juec.2001.2256).

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Published date: 2002
Keywords: job matching, urban land use, transportation policies


Local EPrints ID: 33068
ISSN: 0094-1190
PURE UUID: 9d444b2a-4182-444f-aa8e-727f52ac2f4f

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Date deposited: 15 May 2006
Last modified: 17 Jul 2017 15:54

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Author: Etienne Wasmer
Author: Yves Zenou

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