Workforce location and equilibrium unemployment in a duocentric economy with matching frictions |
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| Institution: | 1. CRED (TEPP) University Panthéon-Assas Paris 2, France;2. IRES, Université catholique de Louvain, Belgium;3. FNRS and IRES, Université catholique de Louvain, Belgium;1. Deutsches Institut für Wirtschaftsforschung (DIW), Mohrenstr. 58, Berlin 10117, Germany;2. Norwegian Business School (BI), Nydalsveien 37, Oslo N-0442, Norway;3. Vrije Universiteit Brussel (VUB), Pleinlaan 2, Brussels B-1050, Belgium;1. Department of Economics, University of Houston, Houston, TX 77204, USA;2. Department of Management and Marketing, Texas A&M, Prairie View, TX 77446, USA;3. Department of Economics, University of Bristol, Bristol, BS 1TN, United Kingdom;1. Department of Management and Technology and CRIOS, Bocconi University, Via Sarfatti 25, I-20136 Milan, Italy;2. Department of Architecture, Built Environment and Construction Engineering, Politecnico di Milano, Piazza Leonardo da Vinci 32, I-20133 Milan, Italy;1. Royal Institute of Technology/VTI, Stockholm, Sweden;2. Department of Economics-KULeuven, Naamse Straat 69, 3000 Leuven, Belgium and CTS-Royal Institute of Technology, Stockholm, Sweden |
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| Abstract: | This article examines unemployment disparities and efficiency in a duocentric city where workers are non-uniformly distributed between the two job centers. We introduce commuting costs and search-matching frictions to deal with the spatial mismatch between workers and firms. In a decentralized economy job-seekers do not internalize a composition externality they impose on all the unemployed. With symmetric job centers, a change in the distribution of the workforce can lead to asymmetric equilibrium outcomes. We calibrate the model for Los Angeles and Chicago Metropolitan Statistical Areas. Simulations suggest that changes in the workforce distribution have non-negligible effects on unemployment rates, wages, and net output, but cannot be the unique explanation of a substantial mismatch problem. |
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