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Car ownership, employment, and earnings

  • Raphael, Steven
  • Rice, Lorien

In this paper, we assess whether the positive effects of car ownership on employment outcomes observed in past research are causal. We match state data on car insurance premiums and per-gallon gas taxes to a microdata sample containing information on car ownership and employment outcomes comparable to the those explored in previous research. In OLS regressions that control for observable demographic and human capital variables, we find large differences in employment rates, weekly hours worked, and hourly earnings between those with and without cars. Instrumenting car ownership on insurance and gas tax costs yields estimates of the employment and hours effects of car ownership that are quite close to the OLS estimates. Concerning wages, the IV models yield negative effects of car ownership on wages. This finding is consistent with the hypothesis that employers located in states with high auto maintenance costs must pay compensating differentials to their employees. When we stratify the sample by skill groupings, we find positive significant employment and hours effects for all skill groups, with larger car-employment effects for low-skilled workers and comparable hours effects across skill categories. Again, the IV results for wages yield negative effects that are insignificant for low- and medium-skilled workers and significant for high-skilled workers.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 52 (2002)
Issue (Month): 1 (July)
Pages: 109-130

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Handle: RePEc:eee:juecon:v:52:y:2002:i:1:p:109-130
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Steven Raphael, 2000. "Estimating the union earnings effect using a sample of displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(3), pages 503-521, April.
  2. Michael A. Stoll & Harry J. Holzer & Keith R. Ihlanfeldt, 2000. "Within cities and suburbs: Racial residential concentration and the spatial distribution of employment opportunities across sub-metropolitan areas," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(2), pages 207-231.
  3. Joshua Angrist, 1988. "Grouped Data Estimation and Testing in Simple Labor Supply Models," Working Papers 614, Princeton University, Department of Economics, Industrial Relations Section..
  4. Raphael, Steven & Riker, David A., 1999. "Geographic Mobility, Race, and Wage Differentials," Journal of Urban Economics, Elsevier, vol. 45(1), pages 17-46, January.
  5. J. David Cummins & Sharon Tennyson, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring.
  6. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, vol. 88(3), pages 450-77, June.
  7. Susan J. Suponcic & Sharon Tennyson, 1998. "Rate Regulation and the Industrial Organization of Automobile Insurance," NBER Chapters, in: The Economics of Property-Casualty Insurance, pages 113-138 National Bureau of Economic Research, Inc.
  8. Lara Shore-Sheppard, 1996. "The Precision of Instrumental Variables Estimates With Grouped Data," Working Papers 753, Princeton University, Department of Economics, Industrial Relations Section..
  9. O'Regan, Katherine M. & Quigley, John M., 1998. "Cars for the Poor," University of California Transportation Center, Working Papers qt72d104xt, University of California Transportation Center.
  10. Holzer Harry J. & Ihlanfeldt Keith R. & Sjoquist David L., 1994. "Work, Search, and Travel among White and Black Youth," Journal of Urban Economics, Elsevier, vol. 35(3), pages 320-345, May.
  11. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  12. J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn.
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