Product Variety and Sector-speci ® c Unemployment

Summary. In this paper, we combine the Harris ± Todaro wage differential and unemployment with product variety. We analyse how city size is determined and how it relates to unemployment. Our main conclusion is as follows. If the government or the city authority executes the policy leading to growth in the urban population, then the unemployment rate decreases. Furthermore, in this case, even the number of the unemployed can decrease, although the city size increases. 1