Spatial search, migration and regional unemployment

The dominant explanation of spatial unemployment in the literature assumes that workers must live in an area in order to be able to access job offers. This gives rise to 'compensating variations' in local wages and unemployment. However, for many occupations search is clearly conducted over longer distances from a home base. In the model presented in this paper, migration and unemployment are analysed both when the optimal search field is local, as in the traditional model. and when search is conducted over longer distances. I compare equilibria in these two regimes, and discuss the implications for regional policy.