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We construct a model of agglomeration economies in a labor market with friction and heterogeneity of both workers and firms. With friction, matches between workers and firms are random. We show that with random matches, an increase in the number of workers brings improvements in worker–firm match quality and agglomeration economies emerge if and only if the technology of search exhibits increasing...
This paper investigates whether a search theoretic model can explain the wage curve, that is, a negative relationship between regional wages and regional unemployment rates, even if the workers are mobile between regions. We show that a simple search model if combined with regional variations in productivity and with a monocentric city structure produces the wage curve.
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