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Wages and Commuting: Quasi-Natural Experiments' Evidence from Firms that relocate

Author

Listed:
  • Ismir Mulalic

    (Technical University of Denmark, and University of Copenhagen, Denmark)

  • Jos N. van Ommeren

    (VU University Amsterdam, the Netherlands)

  • Ninette Pilegaard

    (Technical University of Denmark)

Abstract

This discussion paper resulted in a publication in the 'Economic Journal' , 2014, 124(579), 1086-1105. We examine the causal effect of commuting distance on workers' wages in a quasi-natural experiments setting using information on all workers in Denmark. We account for endogeneity of distance by using changes in distance that are due to firms' relocations. For the range of commuting distances where income tax reductions associated with commuting do not apply, one kilometre increase in commuting distance induces a wage increase of about 0.42%, suggesting an hourly compensation of about half of the hourly net wage. Our findings are consistent with wage bargaining theory and suggest a bargaining power parameter of about 0.50. Due to the experimental setup we are able to exclude many competing explanations of the wage-distance relationship.

Suggested Citation

  • Ismir Mulalic & Jos N. van Ommeren & Ninette Pilegaard, 2010. "Wages and Commuting: Quasi-Natural Experiments' Evidence from Firms that relocate," Tinbergen Institute Discussion Papers 10-093/3, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20100093
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    References listed on IDEAS

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    1. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521875387, April.
    2. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
    3. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    4. Manning, Alan, 2003. "The real thin theory: monopsony in modern labour markets," Labour Economics, Elsevier, vol. 10(2), pages 105-131, April.
    5. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521698221, April.
    6. Gutiérrez-i-Puigarnau, Eva & van Ommeren, Jos N., 2010. "Labour supply and commuting," Journal of Urban Economics, Elsevier, vol. 68(1), pages 82-89, July.
    7. repec:dgr:uvatin:20090008 is not listed on IDEAS
    8. Zax, Jeffrey S, 1991. "The Substitution between Moves and Quits," Economic Journal, Royal Economic Society, vol. 101(409), pages 1510-1521, November.
    9. Zax, Jeffrey S & Kain, John F, 1996. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 472-504, July.
    10. Van Ommeren, Jos & Rietveld, Piet, 2005. "The commuting time paradox," Journal of Urban Economics, Elsevier, vol. 58(3), pages 437-454, November.
    11. Wheaton, William C., 1974. "A comparative static analysis of urban spatial structure," Journal of Economic Theory, Elsevier, vol. 9(2), pages 223-237, October.
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    More about this item

    Keywords

    Bargaining theory; Wages; Commuting;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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