Author : Etienne Lehmann
Publisher :
ISBN 13 :
Total Pages : 43 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions by : Etienne Lehmann
Download or read book Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions written by Etienne Lehmann and published by . This book was released on 2013 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.