Workforce location and equilibrium unemployment in a duocentric economy with matching frictions

Lehmann, Etienne;Montero Ledezma, Paola Liliana;Van der Linden, Bruno
(2016) Journal of Urban Economics — Vol. 91, p. 26-44 (2016)

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  • Lehmann, EtienneUniversité Panthéon-Assas Paris 2
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  • Montero Ledezma, Paola LilianaUCLouvain
    Author
  • Van der Linden, BrunoUCLouvain
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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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Lehmann, E., Montero Ledezma, P. L., & Van der Linden, B. (2016). Workforce location and equilibrium unemployment in a duocentric economy with matching frictions. Journal of Urban Economics, 91, 26-44. https://doi.org/10.1016/j.jue.2015.11.003 (Original work published 2016)