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Does Commuting Reduce Wage Disparities?

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  • Mihails Hazans

    (University of Latvia & BICEPS)

Abstract

This paper shows that in the Baltic countries, commuting reduces urban- rural wage and employment disparities and increases national output. To quantify the effect of commuting on wage differentials, two sets of earnings functions are estimated (based on Estonian, Latvian, and Lithuanian Labor Force Surveys) with location variables (capital city, rural, etc.) measured at the workplace and at the place of residence. We find that the ceteris paribus wage gap between capital city and rural areas, as well as between capital and other cities is significantly narrowed by commuting in some cases but remains almost unchanged in other. Different outcomes are explained by country-specific spatial patterns of commuting, educational and occupational composition of commuting flows, and presence or absence of wage discrimination against rural residents in urban markets. A treatment effects model is used to estimate individual wage gains to rural—urban or inter-city commuting; these gains are substantial in most but not all cases. Wage effects of commuting distance, as well as impact of education, gender, ethnicity, and local labor market conditions on the commuting decision are also explored.

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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0509012.

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Length: 25 pages
Date of creation: 29 Sep 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0509012

Note: Type of Document - pdf; pages: 25
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Web page: http://128.118.178.162

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Keywords: commuting; wage disparities; earnings functions; Baltic countries;

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References

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  1. Mihails Hazans, 2003. "Determinants of Inter-Regional Migration in the Baltic Countries," ERSA conference papers ersa03p354, European Regional Science Association.
  2. Zenou, Yves, 1999. "Urban Unemployment, Agglomeration and Transportation Policies," CEPR Discussion Papers 2309, C.E.P.R. Discussion Papers.
  3. Wasmer, Etienne & Zenou, Yves, 1999. "Does Space Affect Search? A Theory of Local Unemployment," CEPR Discussion Papers 2157, C.E.P.R. Discussion Papers.
  4. So, Kim S. & Orazem, Peter F. & Otto, Daniel M., 1998. "The Effects Of Housing Prices, Wages, And Commuting Time On Joint Residential And Job Location Choices," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20779, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Brueckner, Jan & Thisse, Jacques-François & Zenou, Yves, 2000. "Local Labour Markets, Job Matching and Urban Location," CEPR Discussion Papers 2612, C.E.P.R. Discussion Papers.
  6. Webster, David, 2000. "The Geographical Concentration of Labour-Market Disadvantage," Oxford Review of Economic Policy, Oxford University Press, vol. 16(1), pages 114-28, Spring.
  7. Zax, J.S. & Kain, J.F., 1991. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Harvard Institute of Economic Research Working Papers 1562, Harvard - Institute of Economic Research.
  8. Newell, Andrew T., 2001. "The Distribution of Wages in Transition Countries," IZA Discussion Papers 267, Institute for the Study of Labor (IZA).
  9. Jan Rouwendal & Erik Meijer, 2001. "Preferences for Housing, Jobs, and Commuting: A Mixed Logit Analysis," Journal of Regional Science, Wiley Blackwell, vol. 41(3), pages 475-505.
  10. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  11. R.W. McQuaid, 2001. "Unemployed Job Seeker Attitudes towards Potential Travel-to-Work Times," Growth and Change, Gatton College of Business and Economics, University of Kentucky, vol. 32(3), pages 355-368.
  12. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
  13. Brueckner, Jan K. & Martin, Richard W., 1997. "Spatial mismatch: An equilibrium analysis," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 693-714, November.
  14. Wrede, Matthias, 2001. "Should Commuting Expenses Be Tax Deductible? A Welfare Analysis," Journal of Urban Economics, Elsevier, vol. 49(1), pages 80-99, January.
  15. Richard Arnott, 1997. "Economic Theory and the Spatial Mismatch Hypothesis," Boston College Working Papers in Economics 390., Boston College Department of Economics.
  16. Zax, Jeffrey S., 1991. "Compensation for commutes in labor and housing markets," Journal of Urban Economics, Elsevier, vol. 30(2), pages 192-207, September.
  17. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
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Citations

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Cited by:
  1. Giovanni Russo & Peter Nijkamp & Aura Reggiani & Federico Tedeschi, 2011. "Commuters' effect on local labour markets: A german case study," ERSA conference papers ersa10p1376, European Regional Science Association.
  2. Budy P. Resosudarmo & Asep Suryahadi & Raden Purnagunawan & Athia Yumna & Asri Yusrina, 2009. "The Socioeconomic and Health Status of Rural–Urban Migrants in Indonesia," Development Economics Working Papers 23042, East Asian Bureau of Economic Research.
  3. Sandow, Erika & Westin, Kerstin, 2010. "The persevering commuter - Duration of long-distance commuting," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(6), pages 433-445, July.
  4. Ieva Brauksa & Ludmila Fadejeva, 2013. "Internal Labour Market Mobility in 2005-2011: The Case of Latvia," Working Papers 2013/02, Latvijas Banka.
  5. Hazans, Mihails, 2005. "Unemployment and the earnings structure in Latvia," Policy Research Working Paper Series 3504, The World Bank.
  6. Mihails Hazans, 2003. "Returns to Education in the Baltic Countries," SSE Riga/BICEPS Research Papers 2003-1, Baltic International Centre for Economic Policy Studies (BICEPS) and Stockholm School of Economics in Riga (SSE Riga).
  7. Giovanni Russo & Federico Tedeschi & Aura Reggiani & Peter Nijkamp, 2014. "Commuter Effects on Local Labour Markets: A German Modelling Study," Urban Studies, Urban Studies Journal Limited, vol. 51(3), pages 493-508, February.

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