Urban Spatial Structure, Employment and Social Ties

We develop a model where workers both choose their residential location (geographical
space) and social interactions (social space). In equilibrium, we show
under which condition the majority group resides close to the job center while the
minority group lives far away from it. Even though the two populations are ex ante
totally identical, we find that the majority group experiences a lower unemployment
rate than the minority group and tends to socially interact more with other workers
of its own group. Within each group, we demonstrate that workers residing farther
away from the job center tend to search less for a job and are less likely to be employed.
This model is thus able to explain why ethnic minorities are segregated in
the urban and social space and why this leads to adverse labor-market outcomes in
the absence of any discrimination against the minority group.