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Commuting, Wages and Bargaining Power

  • Elena Stancanelli

    (Théorie économique, modélisation et applications (THEMA))

  • Peter Rupert

    (Department of economics (UCSB))

  • Etienne Wasmer

    (Département d'économie)

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 oung children is essentially zero.

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Paper provided by Sciences Po in its series Sciences Po publications with number 2009-02.

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Date of creation: Feb 2009
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Handle: RePEc:spo:wpmain:info:hdl:2441/10031
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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.
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