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A gravity equation for commuting - with an application to estimating regional and language border effects in Belgium

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  • Damiaan Persyn

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  • Wouter Torfs

Abstract

This paper derives a gravity equation for commuter flows from a simple spatial labor market model based on the classic model developed by Anderson and Van Wincoop in the context of international trade. The approach shows the importance of taking into account the effect of the economic structure of neighboring regions when explaining the size of the commuter flow between two locations, the omission of which would be a significant source of omitted variable bias. As an application, we use this model to identify the effect of regional borders and language borders on commuting using Belgian data on intermunicipality-level commuting between all pairs of municipalities. To handle observations with zero commuters, we estimate the model by means of a negative binomial regression. We went at length to control for relevant variables such as the driving time between two municipalities, but also the travel time by public transport. The theoretical model is used to calculate the relevant controls for economic size of the municipalities and their surroundings. We find that regional borders exert a sizable residual deterrent effect on commuting. This border-effect differs significantly between regions and depends on the direction in which the border is crossed, with commuting flows going from French-speaking areas to Dutch-speaking areas experiencing a stronger deterrent effect from the border; which probably reflects the fact that knowledge of French is relatively more wide-spread in the Dutch-speaking areas compared to the other way around. We consider two extensions of the model. In a first one, we estimate the elasticity of substation for labour from different locations. With an estimated value of 1.3, it seems workers from different localities are hardly substitutable. In the second extension, we use the regional wage-equilibrium condition from our theoretical framework to estimate how the counter-factual removal of a regional border would change regional wages. As it turns out, the estimated effect is quite large, with an upsurge in wages of about 50 percent in the entire south of the country, and with an effect which dies only slowly with distance. As this prediction seems unrealistic, we re-estimated the effects while imposing a higher elasticity of substitution of 2.3. Using this value still gives a rise of about 50 percent, but only for a selection of municipalities in the South of Belgium, with very high unemployment rates, and located closely to high labour demand in the North (in Flanders and Brussels). The effect on municipalities about 20-30 kms from the language border becomes negligible.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa13p599.

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Date of creation: Nov 2013
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Handle: RePEc:wiw:wiwrsa:ersa13p599

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  1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 170-192, March.
  2. Clément Bosquet & Hervé Boulhol, 2010. "Scale-dependence of the Negative Binomial Pseudo-Maximum Likelihood Estimator," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00544129, HAL.
  3. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, Elsevier, vol. 77(1), pages 77-85, February.
  4. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain The Rising Return To College For Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(2), pages 705-746, May.
  5. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3744, London School of Economics and Political Science, LSE Library.
  6. Oliver Falck & Stephan Heblich & Alfred Lameli & Jens Suedekum, 2010. "Dialects, Cultural Identity, and Economic Exchange," CESifo Working Paper Series, CESifo Group Munich 2961, CESifo Group Munich.
  7. Pastorello, Sergio & Patilea, Valentin & Renault, Eric, 2003. "Iterative and Recursive Estimation in Structural Nonadaptive Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 21(4), pages 449-82, October.
  8. Bartz, Kevin & Fuchs-Schündeln, Nicola, 2012. "The role of borders, languages, and currencies as obstacles to labor market integration," European Economic Review, Elsevier, Elsevier, vol. 56(6), pages 1148-1163.
  9. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1580, Harvard - Institute of Economic Research.
  10. Maarten Goos & Alan Manning & Anna Salomons, 2010. "Explaining Job Polarization in Europe: The Roles of Technology, Globalization and Institutions," CEP Discussion Papers, Centre for Economic Performance, LSE dp1026, Centre for Economic Performance, LSE.
  11. Pastorello, Sergio & Patilea, Valentin & Renault, Eric, 2003. "Iterative and Recursive Estimation in Structural Nonadaptive Models: Rejoinder," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 21(4), pages 503-09, October.
  12. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 136(2), pages 284-314, June.
  13. Patricia C. Melo & Daniel J. Graham & Robert B. Noland, 2012. "The effect of labour market spatial structure on commuting in England and Wales ‡," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 12(3), pages 717-737, May.
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