Abstract
This paper studies the impact of transport improvements on the labor market outcomes of heterogeneous workers. Using Paris as a case study, we present new evidence highlighting persistent disparities in unemployment rates over the past fifty years, despite steady reductions in commute times, challenging the idea that better connectivity should equalize labour market outcomes. We then introduce a tractable model of an urban labor market with heterogeneous workers and frictional unemployment. We argue that in equilibrium, improving connectivity might actually exacerbate employment rate differentials. We substantiate this assertion empirically by examining the effects of the creation of the Paris Regional Express Rail (RER). We find that i) connected municipalities experienced an increase in unemployment; ii) this increase is stronger in municipalities with a high share of low-skilled workers; iii) seen as workplaces, these municipalities saw an increase in the number of employees commuting from the broader urban area. Ultimately, we use our framework to decompose the employment gap between skill groups in Paris. We measure a negative spatial mismatch where geography actually reduces employment inequalities between college graduates and the rest of the population.