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A Companion to Urban Economics - Arnott and McMillen - Chapter 25

C H A P T E R T W E N T Y - F I V E Urban Labor Economic Theory 25.1 INTRODUCTION In the United States, it is generally observed that unemployment is unevenly distributed both within and between metropolitan areas. In particular, in most cities, the unemployment rate is nearly twice as high downtown as in the suburbs | A Companion to Urban Economics Edited by Richard J. Arnott Daniel P. McMillen Copyright 2006 by Blackwell Publishing Ltd I CHAPTER TWENTY-FIVE Urban Labor Economic Theory Yves Zenou 25.1 Introduction In the United States it is generally observed that unemployment is unevenly distributed both within and between metropolitan areas. In particular in most cities the unemployment rate is nearly twice as high downtown as in the suburbs see Table 25.1 mainly because of the concentration of blacks in these areas see Table 25.1 who are mainly unskilled see Table 25.2 . Indeed because of massive migration of blacks from the rural south to the urban north after the two world wars and because of discrimination in the housing market blacks had no choice but to live in the central-city ghettoes. While there has been substantial suburbanization of blacks in some cities the legacy of that period remains in the form of inner-city ghettoes. During the same period there has been massive suburbanization of jobs see Table 25.3 . To what extent does this history explain the higher rates of unemployment among blacks than whites Since the seminal work of Kain 1968 many economists contend that the spatial fragmentation of cities can entail adverse social and economic outcomes. These adverse effects typically include the poor labor-market outcomes of ghetto dwellers such as high unemployment and low income and a fair amount of social ills such as low educational attainment and high local criminality . Even though there is no general theory of ghetto formation there has been a series of theoretical and empirical contributions each giving a particular insight into some of the mechanisms at stake. An interesting line of research revolves around the spatial mismatch hypothesis which states that because minorities are physically distant from job opportunities they are more likely to be unemployed and to obtain low net incomes. Table 25.4 documents these features by using the Raphael and Stoll .