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Research Institute of Industrial Economics (IFN) Working Paper Series

No 752:
Endogenous Job Destruction and Job Matching in Cities

Yves Zenou ()

Abstract: We propose a spatial search-matching model where both job creation and job destruction are endogenous. Workers are ex ante identical but not ex post since their job can be hit by a technological shock, which decreases their productivity. They reside in a city and commuting to the job center involves both pecuniary and time costs. Thus, workers with high wages are willing to live closer to jobs to save on time commuting costs. We show that, in equilibrium, there is a one-to-one correspondence between the productivity space and the urban location space. Workers with high productivities and wages reside close to jobs, have low commuting costs and pay high land rents. We also show that higher commuting costs and higher unemployment benefits lead to more job destruction.

Keywords: Job Search; Commuting Costs; Wage Distribution; Urban Land Use; (follow links to similar papers)

JEL-Codes: D83; J41; J64; R14; (follow links to similar papers)

44 pages, June 19, 2008

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