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Is there loss aversion in the trade-off between wages and commuting distances?

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  • Dauth, Wolfgang
  • Haller, Peter

Abstract

We exploit administrative data on exact commuting distances for a large sample of German employees and study the relation of commuting and wages. We focus on the question of whether job changers are loss averse in trading off wages and commuting distances. We find that the willingness to pay for a reduction of the commuting distance is at least as large as the wage increase job changers require to accept an increase in their commute by the same distance. This non-experimental field evidence contradicts the experimental finding of loss aversion and even suggests the existence of reverse loss aversion. One quarter of the positive relationship between wages and commuting can be attributed to the sorting of workers into certain firms at various distances and the remainder to a match-specific wage component that workers and firms bargain over.

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  • Dauth, Wolfgang & Haller, Peter, 2020. "Is there loss aversion in the trade-off between wages and commuting distances?," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:regeco:v:83:y:2020:i:c:s0166046219303126
    DOI: 10.1016/j.regsciurbeco.2020.103527
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    4. Duan, Yige & Jost, Oskar & Jost, Ramona, 2022. "Beyond lost earnings: The long-term impact of jobdisplacement on workers' commuting behavior," CLEF Working Paper Series 44, Canadian Labour Economics Forum (CLEF), University of Waterloo.
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    8. Baumgart, Eike & Blaufus, Kay & Hechtner, Frank, 2023. "The tax treatment of commuting expenses and job-related mobility," arqus Discussion Papers in Quantitative Tax Research 280, arqus - Arbeitskreis Quantitative Steuerlehre.

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    More about this item

    Keywords

    Commuting; Loss aversion; Marginal willingness to pay; Job search;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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