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Wages and Commuting: Quasi-Natural Experiments' Evidence from Firms that relocate

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Author Info

  • Ismir Mulalic

    (Technical University of Denmark, and University of Copenhagen, Denmark)

  • Jos N. van Ommeren

    (VU University Amsterdam, the Netherlands)

  • Ninette Pilegaard

    (Technical University of Denmark)

Abstract

We examine the causal effect of commuting distance on workers' wages in a quasi-natural experiments setting using information on all workers in Denmark. We account for endogeneity of distance by using changes in distance that are due to firms' relocations. For the range of commuting distances where income tax reductions associated with commuting do not apply, one kilometre increase in commuting distance induces a wage increase of about 0.42%, suggesting an hourly compensation of about half of the hourly net wage. Our findings are consistent with wage bargaining theory and suggest a bargaining power parameter of about 0.50. Due to the experimental setup we are able to exclude many competing explanations of the wage-distance relationship.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-093/3.

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Date of creation: 10 Sep 2010
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Handle: RePEc:dgr:uvatin:20100093

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Web page: http://www.tinbergen.nl

Related research

Keywords: Bargaining theory; Wages; Commuting;

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  1. Gutiérrez-i-Puigarnau, Eva & van Ommeren, Jos N., 2010. "Labour supply and commuting," Journal of Urban Economics, Elsevier, vol. 68(1), pages 82-89, July.
  2. Van Ommeren, Jos & Rietveld, Piet, 2005. "The commuting time paradox," Journal of Urban Economics, Elsevier, vol. 58(3), pages 437-454, November.
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Cited by:
  1. Martin Carree & Kristin Kronenberg, 2012. "Locational choices and the costs of distance: empirical evidence for Dutch graduates," ERSA conference papers ersa12p243, European Regional Science Association.
  2. Rosa Sanchis-Guarner, 2012. "Driving Up Wages: The Effects of Road Construction in Great Britain," SERC Discussion Papers 0120, Spatial Economics Research Centre, LSE.

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