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Title: Dual Labour Markets, Urban Unemployment and Multicentric Cities

Author(s): Anthony A. Smith Jr and Yves Zenou

Publication Date: January 1997

Keyword(s): Edge City, Effciciency Wage, Location Taxation and Minimum Wage

Programme Area(s): Human Resources

Abstract: In this paper a two-sector model of urban unemployment is developed which focuses on the formation of a secondary sector under conditions in which a demand shock in the primary sector leads to a sharp increase in unemployment. The optimal location in the secondary sector is shown to be at the edge of the city, giving rise to a multicentric urban spatial structure. Within this spatial structure, we establish conditions under which the new labour market equilibrium involves not only a decrease in unemployment, but also an increase in net income for those unemployed. These results are extended to the case in which all unemployment benefits are financed by local taxation of firms. In this context, it is shown that when taxation discourages entry of a secondary sector, there may be profit incentives for the primary sector to subsidize the entry of a secondary sector.

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Bibliographic Reference

Smith Jr, A and Zenou, Y. 1997. 'Dual Labour Markets, Urban Unemployment and Multicentric Cities'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1566