Spatial mismatch can be the result of optimizing behaviour on the part of the labour market participants. In particular, the unemployed can choose low amounts of search and long-term unemployment if they reside far away from jobs. They choose voluntary not to relocate close to jobs because the short-run gains (low land rent and large housing consumption) are big enough compared to the long-run gains of residing near jobs (higher probability of finding a job).

The spatial mismatch hypothesis states that, residing in urban segregated areas distant from and poorly connected to major
centres of employment growth, black workers face strong geographic barriers to finding and keeping well-paid jobs.

In the U.S. context, where jobs have been decentralized and blacks have stayed in the central part of cities, the main conclusion of the spatial mismatch hypothesis is to put forward the distance to jobs as the main culprit for the high unemployment rates among blacks. In the present paper an alternative theoretical approach to explain the spatial mismatch hypothesis is proposed.

In this research, a spatial labour market model is developed in which both job-matching behaviour and residential-location behaviour are treated simultaneously. Since time is discrete, search intensity is the fraction of the period during which the unemployed are actively searching.

The research shows that distance to jobs is harmful because it implies low search intensities. There is in fact a fundamental
trade-off between short-run and long-run benefits of various location choices for the unemployed. Indeed, locations near jobs are costly in the short run (both in terms of high rents and low housing consumption), but allow higher search intensities which in turn increase the long-run prospects of reemployment.

Conversely, locations far from jobs are more desirable in the short run (low rents and high housing consumption) but allow only infrequent trips to jobs and hence reduce the long-run prospects of reemployment. Therefore, for workers residing further away from the Central Business District, it is optimal to spend the minimal search effort whereas workers residing close to jobs provide high search effort.

Research Institute of Industrial Economics
Yves Zenou (Researcher)

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01/01/2003

Tony E. Smith and Yves Zenou

research

Urban Policy > Economy knowledge & employment > Urban economy

Employment