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The distributional effect of commuting subsidies - Evidence from geo-referenced data and a large-scale policy reform

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  • Heuermann, Daniel F.
  • Assmann, Franziska
  • vom Berge, Philipp
  • Freund, Florian

Abstract

We use the unexpected partial repeal of a tax break for commuters in Germany to examine the distribution of benefits from commuting subsidies between workers and firms. Drawing on a large set of geo-referenced employer-employee data, we use exact route distances between place of work and place of residence to calculate individual net wage benefits from commuting subsidies. In line with urban efficiency wage theories, we find robust evidence that employers compensate workers on average for about one third of the net wage loss caused by the reform if wages are individually negotiated. We find no comparable effect for workers covered by collective wage agreements. The subsequent existence of two common subsidy regimes within an otherwise stable institutional environment allows to draw inference on how each regime redistributes income between wage groups and between regions. We find that the introduction of a lower bound for commuting distances leads to a more equal distribution of net wage benefits between wage groups and regions compared to a regime without a lower bound.

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  • Heuermann, Daniel F. & Assmann, Franziska & vom Berge, Philipp & Freund, Florian, 2017. "The distributional effect of commuting subsidies - Evidence from geo-referenced data and a large-scale policy reform," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 11-24.
  • Handle: RePEc:eee:regeco:v:67:y:2017:i:c:p:11-24
    DOI: 10.1016/j.regsciurbeco.2017.08.001
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    Cited by:

    1. repec:oup:cesifo:v:64:y:2018:i:2:p:292-326. is not listed on IDEAS
    2. Dauth, Wolfgang & Haller, Peter, 2016. "The valuation of changes in commuting distances: an analysis using georeferenced data," IAB Discussion Paper 201643, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Redonda, Agustin & Diaz de Sarralde, Santiago & Hallerberg, Mark & Johnson, Lise & Melamud, Ariel & Rozemberg, Ricardo & Schwab, Jakob & von Haldenwang, Christian, 2018. "Tax expenditure and the treatment of tax incentives for investment," Economics Discussion Papers 2018-57, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    Public policy; Commuting; Taxation; Wages;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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