Dual labor markets, urban unemployment, and multicentric cities

Tony E. Smith, Yves Zenou

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20 Citations (Scopus)


A two-sector model of urban employment is developed which focuses on the formation of a secondary sector in response to a primary-sector demand shock. The optimal location of this (single-firm) sector is shown to give rise to a multicentric urban spatial structure. Conditions are then established under which the new labor market equilibrium involves both a decrease in unemployment and an increase in net income for those unemployed. These results are extended to a case where all unemployment benefits are financed by local taxation of firms. Here it is shown that profit incentives may exist for the primary sector to subsidize entry of the secondary sector.Journal of Economic LiteratureClassification Numbers: J41, R14.

Original languageEnglish
Pages (from-to)185-214
Number of pages30
JournalJournal of Economic Theory
Issue number1
Publication statusPublished - 1 Sep 1997
Externally publishedYes

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