Regional equilibrium unemployment theory at the age of the Internet

This paper studies equilibrium unemployment in a two-region economy with matching frictions, where workers and jobs are free to move and wages are bargained over. Job-seekers choose between searching locally and searching in both regions. Search-matching externalities are amplified by the latter possibility and by the fact that some workers can simultaneously receive a job offer from each region. The rest of the framework builds upon Moretti (2011). Increasing the matching effectiveness out of the region of residence has an ambiguous impact on unemployment rates. While it reduces the probability of remaining unemployed, it also decreases labor demand because of a lower acceptance rate. We characterize the optimal allocation and conclude that the Hosios condition is not sufficient to restore efficiency. A numerical exercise indicates that the loss in net output is non-negligible and rising in the matching effectiveness in the other region.

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Document type	Article de périodique (Journal article) – Article de recherche
Access type	Accès restreint
Publication date	2015
Language	Anglais
Journal information	"Regional Science and Urban Economics" - Vol. 53, p. 50-67 (Jyly 2015)
Peer reviewed	yes
Publisher	Elsevier BV * North-Holland ((Netherlands) Amsterdam)
issn	0166-0462
Publication status	Publié
Affiliation	UCL - SSH/LIDAM/IRES - Institut de recherches économiques et sociales
Keywords	Matching ; Non-segmented labor markets ; Spatial equilibrium ; Regional economics ; Unemployment differentials
Links	http://hdl.handle.net/2078.1/159054[Handle] https://doi.org/10.1016/j.regsciurbeco.2015.04.004[DOI]

See also
	[boreal:134653]	Regional Equilibrium Unemployment Theory at the Age of the Internet