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The Effect of Housing Prices, Wages, and Commuting Time on Joint Residential and Job Location Choices

  • So, Kim Sui
  • Orazem, Peter
  • Otto, Daniel

An empirical model of joint decisions of where to live and where to work demonstrates that individuals make residential and job location choices by trading off wages, housing prices, and commuting costs. Wages are higher in metropolitan markets, but housing prices are also higher in urban areas. Consumers can live in lower priced nonmetropolitan houses and still earn urban wages, but they incur commuting costs that increase with distance from the city. Improvements in transportation that lower commuting time will increase nonmetropolitan populations and will increase the number of nonmetropolitan commuters to metropolitan markets. Equal wage growth across labor markets causes a shift in relative population from rural to urban markets, while an equiproportional increase in housing prices causes a population shift toward rural areas. Copyright 2001, Oxford University Press.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 4050.

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Date of creation: 31 Dec 2009
Date of revision:
Handle: RePEc:isu:genres:4050
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
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  1. Averett, Susan L & Hotchkiss, Julie L, 1995. "The Probability of Receiving Benefits at Different Hours of Work," American Economic Review, American Economic Association, vol. 85(2), pages 276-80, May.
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