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Dual labor markets, urban unemployment, and multicentric cities

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  • SMITH, T. E.
  • ZENOU, Y.

Abstract

In this paper a two-sector model of urban unemployment is developed which focuses on the formation of a secondary sector under conditions in which a demand shock in the primary sector leads to a sharp increase in unemployment. The optimal location in the secondary sector is shown to be at the edge of the city, giving rise to a multicentric urban spatial structure. Within this spatial structure, we establish conditions under which the new labour market equilibrium involves not only a decrease in unemployment, but also an increase in net income for those unemployed. These results are extended to the case in which all unemployment benefits are financed by local taxation of firms. In this context, it is shown that when taxation discourages entry of a secondary sector, there may be profit incentives for the primary sector to subsidize the entry of a secondary sector.
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Suggested Citation

  • Smith, T. E. & Zenou, Y., 1997. "Dual labor markets, urban unemployment, and multicentric cities," LIDAM Reprints CORE 1283, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1283
    DOI: 10.1006/jeth.1997.2296
    Note: In : Journal of Economic Theory, 76 (1), 185--214, 1997
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    Citations

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    Cited by:

    1. J. Meekes & W.H.J. Hassink, 2016. "The role of the housing market in workers’ resilience to job displacement after firm bankruptcy," Working Papers 16-10, Utrecht School of Economics.
    2. Wasmer, Etienne & Zenou, Yves, 1999. "Does Space Affect Search? A Theory of Local Unemployment," CEPR Discussion Papers 2157, C.E.P.R. Discussion Papers.
    3. Steven Ross & Yves Zenou, 2003. "Shirking, Commuting and Labor Market Outcomes," Working papers 2003-41, University of Connecticut, Department of Economics.
    4. Wasmer, Etienne & Zenou, Yves, 2006. "Equilibrium search unemployment with explicit spatial frictions," Labour Economics, Elsevier, vol. 13(2), pages 143-165, April.
    5. Ross, Stephen L. & Zenou, Yves, 2008. "Are shirking and leisure substitutable? An empirical test of efficiency wages based on urban economic theory," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 498-517, September.
    6. Smith, Tony E. & Zenou, Yves, 2003. "Spatial mismatch, search effort, and urban spatial structure," Journal of Urban Economics, Elsevier, vol. 54(1), pages 129-156, July.
    7. Smith, Tony E. & Zenou, Yves, 1997. "Dual Labor Markets, Urban Unemployment, and Multicentric Cities," Journal of Economic Theory, Elsevier, vol. 76(1), pages 185-214, September.
    8. Laurent Gobillon & Harris Selod & Yves Zenou, 2007. "The Mechanisms of Spatial Mismatch," Urban Studies, Urban Studies Journal Limited, vol. 44(12), pages 2401-2427, November.
    9. Ottaviano, Gianmarco & Monfort, Philippe, 2002. "Spatial Mismatch and Skill Accumulation," CEPR Discussion Papers 3324, C.E.P.R. Discussion Papers.
    10. Richard Arnott, 1998. "Economic Theory and the Spatial Mismatch Hypothesis," Urban Studies, Urban Studies Journal Limited, vol. 35(7), pages 1171-1185, June.
    11. Yan Song & Yves Zenou, 2009. "How Do Differences In Property Taxes Within Cities Affect Urban Sprawl?," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 801-831, December.
    12. Jan K. Brueckner & Jacques-FranÁois Thisse & Yves Zenou, 2002. "Local Labor Markets, Job Matching, and Urban Location," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 155-171, February.
    13. Zenou, Yves, 2000. "Urban unemployment, agglomeration and transportation policies," Journal of Public Economics, Elsevier, vol. 77(1), pages 97-133, July.
    14. Ottaviano, Gianmarco I. P., 1999. "Integration, geography and the burden of history," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 245-256, March.
    15. Jacques-François Thisse & Yves Zenou, 1997. "Segmentation et marchés locaux du travail," Économie et Prévision, Programme National Persée, vol. 131(5), pages 65-76.
    16. Akira Nishimori, 1999. "Product Variety and Sector-specific Unemployment," Urban Studies, Urban Studies Journal Limited, vol. 36(9), pages 1467-1473, August.
    17. Meekes, Jordy & Hassink, Wolter, 2017. "The Role of the Housing Market in Workers' Resilience to Job Displacement after Firm Bankruptcy," IZA Discussion Papers 10894, Institute of Labor Economics (IZA).
    18. Jellal, Mohamed & Zenou, Yves, 1999. "Efficiency wages and the quality of job matching," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 201-217, June.
    19. Jan K. Brueckner & Yves Zenou, 2003. "Space and Unemployment: The Labor-Market Effects of Spatial Mismatch," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 242-262, January.
    20. WAUTHY, Xavier & ZENOU, Yves, 1997. "Efficiency wages, labor heterogeneity and the fInancing of the training cost," LIDAM Discussion Papers CORE 1997072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    21. Zenou, Yves, 2009. "Search in cities," European Economic Review, Elsevier, vol. 53(6), pages 607-624, August.
    22. repec:rre:publsh:v:38:y:2008:i:1:p:8-28 is not listed on IDEAS
    23. Frederic Gilli, 2009. "Sprawl or Reagglomeration? The Dynamics of Employment Deconcentration and Industrial Transformation in Greater Paris," Urban Studies, Urban Studies Journal Limited, vol. 46(7), pages 1385-1420, June.
    24. Meekes, Jordy & Hassink, Wolter H.J., 2019. "The role of the housing market in workers′ resilience to job displacement after firm bankruptcy," Journal of Urban Economics, Elsevier, vol. 109(C), pages 41-65.

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    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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