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Wages and Commuting: Quasi‐natural Experiments' Evidence from Firms that Relocate

Author

Listed:
  • Ismir Mulalic
  • Jos N. Van Ommeren
  • Ninette Pilegaard

Abstract

This discussion paper resulted in a publication in the 'Economic Journal' , 2014, 124(579), 1086-1105. We examine the causal effect of commuting distance on workers' wages in a quasi-natural experiments setting using information on all workers in Denmark. We account for endogeneity of distance by using changes in distance that are due to firms' relocations. For the range of commuting distances where income tax reductions associated with commuting do not apply, one kilometre increase in commuting distance induces a wage increase of about 0.42%, suggesting an hourly compensation of about half of the hourly net wage. Our findings are consistent with wage bargaining theory and suggest a bargaining power parameter of about 0.50. Due to the experimental setup we are able to exclude many competing explanations of the wage-distance relationship.
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Suggested Citation

  • Ismir Mulalic & Jos N. Van Ommeren & Ninette Pilegaard, 2014. "Wages and Commuting: Quasi‐natural Experiments' Evidence from Firms that Relocate," Economic Journal, Royal Economic Society, vol. 124(579), pages 1086-1105, September.
    • Handle: RePEc:wly:econjl:v:124:y:2014:i:579:p:1086-1105
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    File URL: http://hdl.handle.net/10.1111/ecoj.2014.124.issue-579
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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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