Efficiency wages, involuntary unemployment and urban spatial structure

Yves Zenou, Tony E. Smith

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33 Citations (Scopus)

Abstract

A labor market model is developed within an urban spatial context, where it is shown that efficiency-wage policies can lead to significant levels of involuntary unemployment. Commuting cost differences between workers and nonworkers tend to increase unemployment, and competition for land tends to segregate workers and nonworkers, with nonworkers relegated to the urban fringe. These findings are extended to a two-city system, where it is shown that even with free mobility of workers, significant wage and unemployment differentials can exist between cities characterized by different levels of productivity.

Original languageEnglish
Pages (from-to)547-573
Number of pages27
JournalRegional Science and Urban Economics
Volume25
Issue number4
DOIs
Publication statusPublished - 1 Aug 1995
Externally publishedYes

Keywords

  • Efficiency wages
  • Labor markets
  • Unemployment

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