On the job search and regional economics
Labor markets are largely and persistently unequal across regions in the U.S. An extensive empirical literature has documented this fact and has shown that inequalities are important in at least three dimensions: wages, unemployment, and market size. In this dissertation I acknowledge the fact that wages, unemployment, and the number of workers and firms in each market are intrinsically related and propose a search-theoretic general equilibrium model in which these variables are explicitly determined. To develop my framework I extend Burdett and Mortensen's (1998) on-the-job search model to introduce multiple markets and, therefore, workers and firms' location decisions. An important feature of my model is that the job arrival rates are not exogenously fixed as in Burdett and Mortensen. Rather, they are derived from an endogenous meeting technology. The model can be used to characterize the interactions between the regional wages, unemployment rates, and number of workers and firms. I apply it to analyze three different cases. First, when the main source of inequality across two markets is differences in regional productivities, workers and firms cluster in the region with higher productivity, and, as a consequence, this region displays higher wages and lower unemployment rates in equilibrium. This negative relationship between wages and unemployment is consistent with the empirical literature. Further, an increase in the national unemployment insurance in this case exacerbates regional inequalities: the region with higher productivity attracts even more workers and more firms, and displays even higher wages and lower unemployment. Second, I analyze the impart of regional amenities on labor market outcomes and find that if amenities have an impact on productivities (positive or negative), then workers and firms agglomerate in a way such that wages and unemployment are once more found to be negatively correlated. If amenities don't affect regional productivities, then wages and unemployment are identical across regions. Finally, I show that even when the regions are completely identical ex-ante, and workers and firms are equally productive, equilibria in which workers are paid different wages and face different unemployment rates can arise in the case of increasing returns to scale.
|Year of publication:||
|Authors:||Dos Santos, Enestor Da Rosa|
|Type of publication:||Other|
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