Compensation for Commuting in Imperfect Urban Markets

We develop an urban equilibrium job search model with employed and unemployed individuals where residential mobility of the unemployed is restricted. We assume a standard mono-centric model (firms are located in one location), but allow for imperfect labour markets. In contrast to models with perfect labour markets, the model predicts that the employed are only partially compensated for commuting costs in the form of wages. As a result, rent gradients are less steep than predicted by standard urban theories that assume perfectly competitive labour markets. © 2007 the author(s). Journal compilation © 2007 RSAI

The Network Composition of Aggregate Unemployment

We develop a theory of unemployment in which workers search for jobs through a network of firms, the labor flow network (LFN). The lack of an edge between two companies indicates the impossibility of labor flows between them due to high frictions. In equilibrium, firms' hiring behavior correlates through the network, modulating labor flows and generating aggregate unemployment. This theory provides new micro-foundations for the aggregate matching function, the Beveridge curve, wage dispersion, and the employer-size premium. Using employer-employee matched records, we study the effect of the LFN topology through a new concept: `firm-specific unemployment'