Commuting, Wages, and Household Decisions

This paper develops a household-level model of commuting that allows to examine how commuting time, wages, labor supply, and consumption decisions interact within the household, and extends traditional urban and labor market models. The theoretical model integrates static and life-cycle perspectives and allows us to examine commuting patterns both across households and within households over time. We employ PSID data and address the potential endogeneity between commuting time and wages using GMM. Our findings indicate that, while cross-sectional analyses suggest a posi- tive correlation between wages and commuting, this relationship weakens significantly when adjusting for household heterogeneity and endogeneity. Additionally, we highlight a positive correlation between commuting time and consumption, and between the spouses’ commuting times. We further document how commuting patterns evolve over the life cycle, with household wealth reducing commuting durations while higher earnings increase them. Our results contribute to the literature on gender gaps, labor mobility, and urban economics by providing a household perspective on commuting and labor market outcomes.