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Does Commuting Reduce Wage Disparities?

  • Mihails Hazans

    (University of Latvia & BICEPS)

This paper shows that in the Baltic countries, commuting reduces urban- rural wage and employment disparities and increases national output. To quantify the effect of commuting on wage differentials, two sets of earnings functions are estimated (based on Estonian, Latvian, and Lithuanian Labor Force Surveys) with location variables (capital city, rural, etc.) measured at the workplace and at the place of residence. We find that the ceteris paribus wage gap between capital city and rural areas, as well as between capital and other cities is significantly narrowed by commuting in some cases but remains almost unchanged in other. Different outcomes are explained by country-specific spatial patterns of commuting, educational and occupational composition of commuting flows, and presence or absence of wage discrimination against rural residents in urban markets. A treatment effects model is used to estimate individual wage gains to rural—urban or inter-city commuting; these gains are substantial in most but not all cases. Wage effects of commuting distance, as well as impact of education, gender, ethnicity, and local labor market conditions on the commuting decision are also explored.

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File URL: http://128.118.178.162/eps/lab/papers/0509/0509012.pdf
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Paper provided by EconWPA in its series Labor and Demography with number 0509012.

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Length: 25 pages
Date of creation: 29 Sep 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0509012
Note: Type of Document - pdf; pages: 25
Contact details of provider: Web page: http://128.118.178.162

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  1. Newell, Andrew T., 2001. "The Distribution of Wages in Transition Countries," IZA Discussion Papers 267, Institute for the Study of Labor (IZA).
  2. Brueckner, Jan K. & Martin, Richard W., 1997. "Spatial mismatch: An equilibrium analysis," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 693-714, November.
  3. Kim S. So & Peter F. Orazem & Daniel M. Otto, 2001. "The Effects of Housing Prices, Wages, and Commuting Time on Joint Residential and Job Location Choices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1036-1048.
  4. Mihails Hazans, 2003. "Determinants of Inter-Regional Migration in the Baltic Countries," ERSA conference papers ersa03p354, European Regional Science Association.
  5. Richard Arnott, 1998. "Economic Theory and the Spatial Mismatch Hypothesis," Urban Studies, Urban Studies Journal Limited, vol. 35(7), pages 1171-1185, June.
  6. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
  7. Zax, J.S. & Kain, J.F., 1991. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Harvard Institute of Economic Research Working Papers 1562, Harvard - Institute of Economic Research.
  8. Zenou, Yves, 2000. "Urban unemployment, agglomeration and transportation policies," Journal of Public Economics, Elsevier, vol. 77(1), pages 97-133, July.
  9. Jan K. Brueckner & Jacques-FranÁois Thisse & Yves Zenou, 2002. "Local Labor Markets, Job Matching, and Urban Location," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 155-171, February.
  10. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
  11. Webster, David, 2000. "The Geographical Concentration of Labour-Market Disadvantage," Oxford Review of Economic Policy, Oxford University Press, vol. 16(1), pages 114-28, Spring.
  12. Jan Rouwendal & Erik Meijer, 2001. "Preferences for Housing, Jobs, and Commuting: A Mixed Logit Analysis," Journal of Regional Science, Wiley Blackwell, vol. 41(3), pages 475-505.
  13. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  14. Zax, Jeffrey S., 1991. "Compensation for commutes in labor and housing markets," Journal of Urban Economics, Elsevier, vol. 30(2), pages 192-207, September.
  15. R.W. McQuaid, 2001. "Unemployed Job Seeker Attitudes towards Potential Travel-to-Work Times," Growth and Change, Wiley Blackwell, vol. 32(3), pages 355-368.
  16. Wasmer, Etienne & Zenou, Yves, 1999. "Does Space Affect Search? A Theory of Local Unemployment," CEPR Discussion Papers 2157, C.E.P.R. Discussion Papers.
  17. Wrede, Matthias, 2001. "Should Commuting Expenses Be Tax Deductible? A Welfare Analysis," Journal of Urban Economics, Elsevier, vol. 49(1), pages 80-99, January.
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