Introduction

The search-matching model is by now the standard workhorse of labor economists (Pissarides, 2000). In this chapter, we first develop a canonical model of urban search-matching, i.e., we introduce a land market into a standard search-matching model. The link between the land and the labor market is realized through the average search intensity of unemployed workers. Indeed, the latter depends on the location of all unemployed workers in the city, which is endogenously determined in the land-use equilibrium. The location of workers, in turn, depends on the outcomes of the labor market. To understand the way the two markets operate, we first develop a simple model in which search intensity is exogenous (Section 2). Due to this assumption, only one urban pattern emerges in equilibrium: employed workers reside close to jobs while unemployed workers live on the periphery of the city. In Section 3, we extend this benchmark model by assuming that workers' search intensity depends negatively on their residential distance to jobs. This leads to two urban-land-use equilibrium configurations in which unemployed workers either reside close to or far away from jobs. In Section 4, unemployed workers endogenously choose their search intensity and we are able to show that they search less, the further away they reside from jobs. Besides the two previous urban configurations, there is a third urban equilibrium (the core-periphery equilibrium) where unemployed workers reside both close to (short-run unemployed workers) and far away (long-run unemployed workers) from jobs while employed workers live in between them.