Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89911
Authors: 
Lehmann, Etienne
Montero Ledezma, Paola L.
Van der Linden, Bruno
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7828
Abstract: 
This article examines unemployment disparities and efficiency in a densely populated economy with two job centers and workers distributed between them. We introduce commuting costs and search-matching frictions to deal with the spatial mismatch between workers and firms. In equilibrium, there exists a unique threshold location where job-seekers are indifferent between job centers. In a decentralized economy job-seekers do not internalize a composition externality they impose on all the unemployed. Their decisions over job-search are thus typically not optimal and hence the equilibrium unemployment rates are inefficient. We calibrate the model for Los Angeles and Chicago Metropolitan Statistical Areas. Simulations exercises suggest that changes in the workforce distribution have non-negligible effects on unemployment rates, wages and net output.
Subjects: 
spatial mismatch
commuting
urban unemployment
externality
United States
JEL: 
J64
R13
R23
Document Type: 
Working Paper

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