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An empirical on-the-job search model with preferences for relative earnings: How high is the value of commuting time?

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  • Isacsson, Gunnar

    ()
    (VTI)

  • Swärdh, Jan-Erik

    ()
    (VTI)

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    Abstract

    The purpose of this paper is to estimate the average value of commuting time (VoCT) in an empirical on-the-job search model. A large Swedish sample of employee-establishment linked data obtained from administrative registers is used to this end. The sample contains detailed information on the individuals' place of residence and place of work and it is combined with information on travel times and travel distances in the road network. We use two empirical models of the individuals' utility function: a basic model and an augmented model. The latter introduces a set of variables intended to capture the effect of interpersonal comparisons of earnings and commuting times in the individual's utility function and on the estimated VoCT. The basic model suggests the average VoCT to be as high as 232 Swedish kronor (SEK) per hour, which is about two and half times higher than the net hourly wage rate in the sample. If we discard the effect of interpersonal comparisons of earnings and commuting time on job switching, the augmented model instead suggests a value of time of 94 SEK, which is more or less equal to the net hourly wage rate in the sample.

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    File URL: http://www.transportportal.se/SWoPEc/Isacsson_Swardh_VoCT.pdf
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    Bibliographic Info

    Paper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2007:12.

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    Length: 31 pages
    Date of creation: 20 Sep 2007
    Date of revision:
    Handle: RePEc:hhs:vtiwps:2007_012

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    Postal: VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden
    Phone: +46-13-20 40 00
    Fax: +46-13-14 14 36
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    Web page: http://www.vti.se/tek
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    Keywords: Value of commuting time; Revealed preferences; Relative earnings;

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    References

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    1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, Elsevier, vol. 70(1), pages 157-183, October.
    2. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 997-1019, June.
    3. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1039-61, November.
    4. Munro, Alistair & Sugden, Robert, 2003. "On the theory of reference-dependent preferences," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 50(4), pages 407-428, April.
    5. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(1), pages 3-24, Winter.
    6. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 45(3), pages 251-278, July.
    7. Ommeren, Jos van & Berg, Gerard J. van den & Gorter, Cees, 1998. "Estimating the marginal willingness to pay for commuting," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0046, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    8. Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(4), pages 1133-1165, November.
    9. J. Solnick, Sara & Hemenway, David, 1998. "Is more always better?: A survey on positional concerns," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 37(3), pages 373-383, November.
    10. Jan Rouwendal & Erik Meijer, 2001. "Preferences for Housing, Jobs, and Commuting: A Mixed Logit Analysis," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 41(3), pages 475-505.
    11. Lars Hultkrantz & Reza Mortazavi, 2001. "Anomalies in the Value of Travel-Time Changes," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 35(2), pages 285-299, May.
    12. Randall, Alan & Stoll, John R, 1980. "Consumer's Surplus in Commodity Space," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 449-55, June.
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    Cited by:
    1. Karlström, Anders & Isacsson, Gunnar, 2009. "Is sick absence related to commuting travel time? - Swedish Evidence Based on the Generalized Propensity Score Estimator," Working Papers, Swedish National Road & Transport Research Institute (VTI) 2010:3, Swedish National Road & Transport Research Institute (VTI).
    2. Swärdh, Jan-Erik, 2008. "Is the intertemporal income elasticity of the value of travel time unity?," Working Papers, Swedish National Road & Transport Research Institute (VTI) 2008:3, Swedish National Road & Transport Research Institute (VTI).
    3. Van Ommeren, Jos & Fosgerau, Mogens, 2009. "Workers' marginal costs of commuting," Journal of Urban Economics, Elsevier, vol. 65(1), pages 38-47, January.
    4. Isacsson, Gunnar & Karlström, Anders & Swärdh, Jan-Erik, 2008. "The value of time from subjective data on life satisfaction and job satisfaction: An empirical assessment," Working Papers, Swedish National Road & Transport Research Institute (VTI) 2008:2, Swedish National Road & Transport Research Institute (VTI).

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