Dual Labor Markets, Urban Unemployment and Multicentric Cities

CEPR Discussion Paper Series #1566

Posted: 30 Apr 1997

See all articles by Tony E. Smith

Tony E. Smith

University of Pennsylvania - Department of Systems Engineering

Yves Zenou

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

Date Written: January 1997

Abstract

In this paper a two-sector model of urban unemployment is developed which focuses on the formation of a secondary sector under conditions in which a demand shock in the primary sector leads to a sharp increase in unemployment. The optimal location in the secondary sector is shown to be at the edge of the city, giving rise to a multicentric urban spatial structure. Within this spatial structure, we establish conditions under which the new labor market equilibrium involves not only a decrease in unemployment, but also an increase in net income for those unemployed. These results are extended to the case in which all unemployment benefits are financed by local taxation of firms. In this context, it is shown that when taxation discourages entry of a secondary sector, there may be profit incentives for the primary sector to subsidize the entry of a secondary sector.

JEL Classification: J41, R14

Suggested Citation

Smith, Tony E. and Zenou, Yves, Dual Labor Markets, Urban Unemployment and Multicentric Cities (January 1997). CEPR Discussion Paper Series #1566, Available at SSRN: https://ssrn.com/abstract=3921

Tony E. Smith (Contact Author)

University of Pennsylvania - Department of Systems Engineering ( email )

School of Engineering & Applied Science
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-9647 (Phone)
215-898-5020 (Fax)

Yves Zenou

Monash University - Department of Economics ( email )

Australia

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

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
944
PlumX Metrics