An urban labor market with frictional housing markets: Theory and an application to the Paris urban area

Guillaume Chapelle, Etienne Wasmer, Pierre Henri Bono

Research output: Contribution to journalArticle

Abstract

We build a tractable model of frictional labor markets and segmented housing markets to study welfare effects of regulations, including spatial misallocation and deviation from competitive pricing of rents. The model is summarized by a labor demand curve depending on rents and wages, a wage curve reflecting labor market tightness and rents, and finally a rent curve reflecting employment. In this economy, the rent gradient in the flexible rent sector is higher than in a purely competitive housing market. This leads to spatial misallocation due to some employees commuting too much and some non-employed living inefficiently close to jobs. In turn, reducing generalized commuting costs reduces the rent gradient in the flexible rent sector and the cost of spatial misallocation of workers. The reduction in market rents is maximal when labor markets are less frictional and housing markets are more frictional, and welfare gains are larger when both are more efficient.
Original languageEnglish (US)
JournalJournal of Economic Geography
StateAccepted/In press - Jan 14 2020

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housing market
rent
labor market
urban area
commuting
wage
cost
labor
market
wage curve
welfare
Urban areas
Housing market
Urban labor markets
Rent
labor demand
costs
pricing
employee
worker

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An urban labor market with frictional housing markets : Theory and an application to the Paris urban area. / Chapelle, Guillaume; Wasmer, Etienne; Bono, Pierre Henri.

In: Journal of Economic Geography, 14.01.2020.

Research output: Contribution to journalArticle

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