Working Paper: CEPR ID: DP1011
Authors: Masahisa Fujita; Jacques-François Thisse; Yves Zenou
Abstract: Cities are often viewed as places fostering employment. It is shown that the choice of a particular location within a city is a key factor for the creation of jobs by a new firm. This question is addressed in the context of a standard urban model in which existing firms are established at the city center and where workers compete on both the land and labour markets. The new firm is supposed to anticipate the impact of its location and wage decision on those two markets. Different urban configurations then emerge depending on the competitiveness of the existing firms on the labour market. More jobs are created as the firm sets up further away from the city center.
Keywords: firm location; job creation; labour migration; urban configurations
JEL Codes: J61; R14; R30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm location (R30) | job creation (J68) |
| location at city center (R53) | job diversion (J68) |
| location at outskirts (R32) | job attraction from outside (J68) |
| firm location (R30) | wage setting (J38) |
| location at periphery (R32) | monopsony power (J42) |