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Economy-Wide Spillovers from Booms: Long-Distance Commuting and the Spread of Wage Effects

In: Small Differences II: Public Policies in Canada and the United States

Author

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  • David A. Green
  • René Morissette
  • Ben M. Sand
  • Iain Snoddy

Abstract

Since 2000, US real average wages have either stagnated or declined while Canadian average wages increased by almost 10%. We investigate the role of the Canadian resource boom in explaining this difference. We construct a model of wage setting that allows for spillover effects of a resource boom on wages in non-resource intensive locations and formulate an empirical specification based on that model. A key feature of this (and other) resource booms was the prevalence of long distance commuting - working in a resource location but residing in another community. The core idea in our model is that the expansion of the value of the commuting option during the boom allowed non-commuters to bargain higher wages. We find that wages do rise in areas with more long distance commuting. Combining these spillover effects with bargaining spillover effects in resource boom locations, we can account for 49% of the increase in the real mean wage in Canada between 2000 and 2012. We find similar effects of long distance commuting on wages in the US but the resource boom was less salient in the US and the effect on wages was one-tenth of that in Canada. Our results have implications for other papers measuring the impacts of resource booms on wages in surrounding areas. Our main finding is that long-distance commuting can integrate regions in a way that spreads the benefits and costs of a boom across the economy.
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  • David A. Green & René Morissette & Ben M. Sand & Iain Snoddy, 2016. "Economy-Wide Spillovers from Booms: Long-Distance Commuting and the Spread of Wage Effects," NBER Chapters, in: Small Differences II: Public Policies in Canada and the United States, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13978
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    Cited by:

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    6. Simona E. Cociuba & James C. MacGee, 2018. "Demographics and Sectoral Reallocations: A Search Theory with Immobile Workers," University of Western Ontario, Departmental Research Report Series 20182, University of Western Ontario, Department of Economics.
    7. Pierre Brochu & David A. Green & James Townsend & Thomas Lemieux, 2023. "The minimum wages, turnover, and the shape of the wage distribution," IFS Working Papers W23/32, Institute for Fiscal Studies.
    8. Zabek, Mike, 2018. "Local Ties in Spatial Equilibrium," SocArXiv rpq5z, Center for Open Science.
    9. Unel, Bulent & Upton, Gregory B., 2023. "Oil & gas induced economic fluctuations and self-employment," Labour Economics, Elsevier, vol. 82(C).
    10. Christian Dustmann & Hyejin Ku & Tetyana Surovtseva, 2023. "Real Exchange Rates and the Earnings of Immigrants," The Economic Journal, Royal Economic Society, vol. 134(657), pages 271-294.
    11. Winters, John V. & Cai, Zhengyu & Maguire, Karen & Sengupta, Shruti, 2019. "Do Workers Benefit from Resource Booms in Their Home State? Evidence from the Fracking Era," GLO Discussion Paper Series 400, Global Labor Organization (GLO).
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    13. Stephan Brunow & Ramona Jost, 2023. "Being a long distance out-commuter or home employee in a rather peripheral region evidence of a German federal state," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 43(2), pages 317-342, August.
    14. Green, David & Kesselman, Jonathan Rhys & Tedds, Lindsay M., 2021. "Covering All the Basics: Reforms for a More Just Society," MPRA Paper 105902, University Library of Munich, Germany.
    15. Amior, Michael & Manning, Alan, 2019. "Commuting, migration and local joblessness," LSE Research Online Documents on Economics 102745, London School of Economics and Political Science, LSE Library.
    16. João Galindo da Fonseca & Charles Berubé, 2023. "Spouses, Children, And Entrepreneurship," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1165-1199, August.
    17. Alonso Alfaro Urena & Isabela Manelici & Jose P. Vasquez, 2021. "The Effects of Multinationals on Workers: Evidence from Costa Rican Microdata," Working Papers 285, Princeton University, Department of Economics, Center for Economic Policy Studies..
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    19. Onur Sapci, 2022. "The Impact of Shale Energy on Population Dynamics, Labor Migration, and Employment," Energies, MDPI, vol. 15(22), pages 1-17, November.

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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