Bid rents under unemployment risk: delayed versus timeless uncertainty

In this paper, we analyze the impact of uncertainty on the level and properties of the bid rent function. We show that these properties strongly depend upon the way in which uncertainty is introduced into the model (delayed versus timeless uncertainty). We also investigate the implication of income uncertainty for the city equilibrium. We show that under timeless uncertainty, a more generous unemployment benefits program may be in the long run welfare reducing in an urban setting.