IDEAS home Printed from
   My bibliography  Save this paper

Commuting and Migration Decisions under Cost Uncertainty


  • Christian Schmidt



In recent decades, many countries have experienced suburbanization processes in metropolitan areas that have lead to an increase in urban sprawl by creating a growing polarity between newly formed satellite communities and the central urban area. More than before, work and residence location diverged. In this context, commuting and migration are two fundamental ways of connecting an individual's place of work with his residence. These distinctive mobility modes represent temporary and permanent mobility, respectively. Deciding for any of the two incurs peculiar costs. Commuting requires recurring costs that the individual has to bear without permanently changing his residence. In contrast, migration relocates the place of residence and can therefore prevent periodical mobility costs. Due to this fact, migration can serve as an alternative to commuting in respect to connecting the place of residence with the work place. This paper represents work in progress on the individual decision between commuting and migrating to the place of work in face of uncertain commuting costs. Solutions for two initial states are derived on the basis of the real options theory. The threshold commuting cost levels at which it is optimal for the individual to relocate to the suburb when initially living in the metropolitan center and to relocate to the city center when initially living in the suburb are presented and compared to the classical net present value solution without uncertainty about commuting costs. The effect of uncertainty about the evolution of commuting costs on the optimal decision denotes a remarkable result of this model: higher uncertainty lowers the commuting cost threshold for outmigration to the suburb, while increasing it for inmigration to the city center. On the one hand, individuals initially not commuting but living in the city center deter a possible outmigration even under increasingly unfavorable rental cost conditions. On the other hand, individuals initially living in the suburb are willing to bear significantly higher commuting costs before eventually relocating to the metropolitan center.

Suggested Citation

  • Christian Schmidt, 2011. "Commuting and Migration Decisions under Cost Uncertainty," ERSA conference papers ersa10p1481, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa10p1481

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Simpson, Wayne, 1980. "A simultaneous model of workplace and residential location incorporating job search," Journal of Urban Economics, Elsevier, vol. 8(3), pages 330-349, November.
    2. Mahmudul Anam & Shin-Hwan Chiang & Lieng Hua, 2008. "Uncertainty and International Migration: An Option Cum Portfolio Model," Journal of Labor Research, Springer, vol. 29(3), pages 236-250, September.
    3. Burda, Michael C, 1995. "Migration and the Option Value of Waiting," CEPR Discussion Papers 1229, C.E.P.R. Discussion Papers.
    4. Kent Eliasson & Urban Lindgren & Olle Westerlund, 2003. "Geographical Labour Mobility: Migration or Commuting?," Regional Studies, Taylor & Francis Journals, vol. 37(8), pages 827-837.
    5. M. Moretto & Sergio Vergalli, 2008. "Migration dynamics," Journal of Economics, Springer, vol. 93(3), pages 223-265, April.
    6. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    7. van Ommeren, Jos & Rietveld, Piet & Nijkamp, Peter, 1997. "Commuting: In Search of Jobs and Residences," Journal of Urban Economics, Elsevier, vol. 42(3), pages 402-421, November.
    8. Jacques Poot, 2007. "Demographic Change and Regional Competitiveness: The Effects of Immigration and Ageing," Population Studies Centre Discussion Papers dp-64, University of Waikato, Population Studies Centre.
    9. Sergio Vergalli, 2008. "The Role of Community in Migration Dynamics," LABOUR, CEIS, vol. 22(3), pages 547-567, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa10p1481. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.