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Commuting, Wages and Bargaining Power

  • Rupert, Peter


    (University of California, Santa Barbara)

  • Stancanelli, Elena G. F.


    (CNRS, Sorbonne Economics Research Center (CES))

  • Wasmer, Etienne


    (Sciences Po, Paris)

A search model of the labor market is augmented to include commuting time to work. The theory posits that wages are positively related to commute distance, by a factor itself depending negatively on the bargaining power of workers. Since not all combinations of distance and wages are accepted, there is non-random selection of accepted job offers. We build on these ingredients to explore in the data the relationship between wages and commute time. We find that neglecting to account for this selection will bias downward the wage impact of commuting, and marginally affect the coefficients on education, age and gender. The correlation between the residuals of the selectivity equation and the distance equation is -0.70, showing the large impact of commute time on job acceptance decisions. We also use the theory to calculate the bargaining power of workers which largely varies depending on demographic groups: it appears to be much larger for men than that for women and that the bargaining power of women with young children is essentially zero.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4510.

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Length: 30 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Annales d'Economie et de Statistiques, 2009, (95 - 96), 201 - 221
Handle: RePEc:iza:izadps:dp4510
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  1. Manning, Alan, 2003. "The real thin theory: monopsony in modern labour markets," Labour Economics, Elsevier, vol. 10(2), pages 105-131, April.
  2. Ommeren, Jos van & Berg, Gerard J. van den & Gorter, Cees, 1998. "Estimating the marginal willingness to pay for commuting," Serie Research Memoranda 0046, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  3. Damien Gaumont & Martin Schindler & Randall Wright, 2006. "Equilibrium Wage Dispersion: An Example," 2006 Meeting Papers 147, Society for Economic Dynamics.
  4. John M. Abowd & Francis Kramarz, 1992. "A Test of Negotiation and Incentive Compensation Models Using Longitudinal French Enterprise Data," NBER Working Papers 4044, National Bureau of Economic Research, Inc.
  5. repec:inr:wpaper:150201 is not listed on IDEAS
  6. Gautier, Pieter A. & Zenou, Yves, 2008. "Car Ownership and the Labor Market of Ethnic Minorities," IZA Discussion Papers 3814, Institute for the Study of Labor (IZA).
  7. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00176090, HAL.
  8. Hans Bloemen & Elena Stancanelli, 2001. "Individual Wealth, Reservation Wages, and Transitions into Employment," Post-Print hal-01017002, HAL.
  9. van den Berg, Gerard J & Gorter, Cees, 1997. "Job Search and Commuting Time," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 269-81, April.
  10. David Roodman, 2009. "Estimating Fully Observed Recursive Mixed-Process Models with cmp," Working Papers 168, Center for Global Development.
  11. Gaumont, Damien & Schindler, Martin & Wright, Randall, 2006. "Alternative theories of wage dispersion," European Economic Review, Elsevier, vol. 50(4), pages 831-848, May.
  12. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  13. Diamond, Peter A, 1981. "Mobility Costs, Frictional Unemployment, and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 798-812, August.
  14. Wasmer, Etienne & Zenou, Yves, 1999. "Does Space Affect Search? A Theory of Local Unemployment," CEPR Discussion Papers 2157, C.E.P.R. Discussion Papers.
  15. repec:oup:restud:v:49:y:1982:i:2:p:217-27 is not listed on IDEAS
  16. Shihe Fu & Stephen L. Ross, 2010. "Wage Premia in Employment Clusters: Agglomeration or Worker Heterogeneity?," Working Papers 10-04, Center for Economic Studies, U.S. Census Bureau.
  17. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
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