Local Labor Markets, Job Matching, and Urban Location

17 Pages Posted: 4 Jan 2003

See all articles by Jan K. Brueckner

Jan K. Brueckner

University of California, Irvine - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Yves Zenou

Monash University - Department of Economics; Stockholm University; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Abstract

We present a new way of modeling local labor markets by linking the space of workers' skills and the physical space of cities. The key lesson of our analysis is that firms exploit workers in these two spaces by setting wages that are below the competitive level. The degree of monopsony power depends on the elasticity of the firm's labor pool, which is inversely related to the costs workers incur in commuting and acquiring skills. Our analysis thus shows how socioeconomic ghettos emerge as workers with poor skill matches are also those who incur the highest commuting costs.

Suggested Citation

Brueckner, Jan K. and Thisse, Jacques-François and Zenou, Yves, Local Labor Markets, Job Matching, and Urban Location. International Economic Review, Vol. 43, pp. 155-171, 2002. Available at SSRN: https://ssrn.com/abstract=312524

Jan K. Brueckner (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yves Zenou

Monash University - Department of Economics ( email )

Australia

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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