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Urban unemployment, agglomeration and transportation policies

Urban unemployment, agglomeration and transportation policies
Urban unemployment, agglomeration and transportation policies
We study the role of unemployment in the context of the endogeneous formation of a monocentric city in which firms set efficiency wages to deter shirking. We first show that, in equilibrium, the employed locate at the vicinity of the city-center, the unemployed reside at the city-edge and firms set up in the city-center. We then show that there is a ‘spatial mismatch’ between location and jobs because the further away from jobs the unemployed, the larger the level of unemployment. Finally, we derive some policy implications. We show that a policy that improves the city transportation network (by subsidizing the commuting costs of all workers) reduces urban unemployment, increases utilities of all workers but raises inequality whereas a policy that supports the transportation of the unemployed only (by subsidizing their commuting costs) increases urban unemployment, does not always raise workers’ utilities but reduces inequality.
97-133
Zenou, Y.
868c9274-e15a-4044-96c8-6eb6a0121293
Zenou, Y.
868c9274-e15a-4044-96c8-6eb6a0121293

Zenou, Y. (2000) Urban unemployment, agglomeration and transportation policies. Journal of Public Economics, 77 (1), 97-133. (doi:10.1016/S0047-2727(99)00083-3).

Record type: Article

Abstract

We study the role of unemployment in the context of the endogeneous formation of a monocentric city in which firms set efficiency wages to deter shirking. We first show that, in equilibrium, the employed locate at the vicinity of the city-center, the unemployed reside at the city-edge and firms set up in the city-center. We then show that there is a ‘spatial mismatch’ between location and jobs because the further away from jobs the unemployed, the larger the level of unemployment. Finally, we derive some policy implications. We show that a policy that improves the city transportation network (by subsidizing the commuting costs of all workers) reduces urban unemployment, increases utilities of all workers but raises inequality whereas a policy that supports the transportation of the unemployed only (by subsidizing their commuting costs) increases urban unemployment, does not always raise workers’ utilities but reduces inequality.

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Published date: 2000

Identifiers

Local EPrints ID: 33074
URI: https://eprints.soton.ac.uk/id/eprint/33074
PURE UUID: cb74d680-e183-4e2e-b2ac-444af58a7031

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Date deposited: 18 May 2006
Last modified: 17 Jul 2017 15:54

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