Francesco Pascucci : “Wage Rigidities in a Quantitative Spatial Economy”  with Nathan Lachapelle

Room : P02

In this paper we build a quantitative spatial general equilibrium model to study the geographical variation in unemployment rates in the presence of wage rigidities and when workers are allowed to commute from residence to workplace. To gauge the magnitude of wage distortions, we compare the observed gross wage levels with the counterfactual market-clearing wages. Calibrating the model on Belgian district data, we find that removing wage rigidities would generate significant gains in local and total GDP and modest gains in the average real net labor income per resident.