TY  - RPRT
        AU  - Lehmann, Etienne
AU  - Ledezma, Paola L. Montero
AU  - Linden, Bruno Van der
        TI  - Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions
        PY  - 2013/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 7828
        UR  - https://www.iza.org/publications/dp7828
        AB  - 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.
        KW  - urban unemployment
KW  - commuting
KW  - spatial mismatch
KW  - externality
KW  - United States
        ER  -