evidence from firms that relocate

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. JEL codes J22, R41

[1]  P. Madsen.  European Foundation for the Improvement of Living and Working Conditions Interactions between Labour Market and Social Protection Brussels May 16 , 2002 The Danish Model of “ Flexicurity ” – A Paradise with some Snakes , 2002 .

[2]  Robin Anderson.  Moving on From the Suburbs , 2009 .

[3]  Jos N. van Ommeren,et al.  Spatial Mobility and Commuting: The Case of Two-Earner Households , 2009 .

[4]  Jos N. van Ommeren,et al.  Labour Supply and Commuting , 2009, SSRN Electronic Journal.

[5]  Luca Sala,et al.  An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining , 2008 .

[6]  Uri Simonsohn,et al.  New Yorkers Commute More Everywhere: Contrast Effects in the Field , 2006, Review of Economics and Statistics.

[7]  Stephen Potter,et al.  Tax Treatment of Employer Commuting Support: An International Review , 2006 .

[8]  P. Rietveld,et al.  The commuting time paradox , 2005 .

[9]  Eva Nagypal,et al.  More on Unemployment and Vacancy Fluctuations , 2005, SSRN Electronic Journal.

[10]  Alan Manning,et al.  The Real Thin Theory: Monopsony in Modern Labour Markets , 2003 .

[11]  Andrew J. Oswald,et al.  Commuting in Great Britain in the 1990s , 2000 .

[12]  R. Marimon,et al.  Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits , 1997 .

[13]  Jacques-François Thisse,et al.  On the endogeneous formation of secondary employment centers in a city , 1997 .

[14]  J. Kain,et al.  Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees behind? , 1996, Journal of Labor Economics.

[15]  T. Iversen.  “Power, Flexibility, and the Breakdown of Centralized Wage Bargaining. Denmark and Sweden in Comparative Perspective” , 1996 .

[16]  J. Zax.  The Substitution between Moves and Quits , 1991 .

[17]  C. A. Pissarides,et al.  Equilibrium Unemployment Theory , 1990 .

[18]  M. White,et al.  A model of residential location choice and commuting by men and women workers. , 1977, Journal of regional science.

[19]  W. Wheaton,et al.  A comparative static analysis of urban spatial structure , 1974 .

[20]  J. Robin,et al.  Wage Bargaining with On-the-Job Search: Theory and Evidence , 2003 .

[21]  M. Fosgerau,et al.  The Danish Value of Time Study: Transfer Pricing , 2007 .

[22]  K. Small,et al.  The economics of urban transportation , 2007 .

[23]  R. Hall.  Sources and Mechanisms of Cyclical Fluctuations in the Labor Market , 2006 .

[24]  Stephen Machin,et al.  Transport and Labour Market Linkages: Empirical Evidence, Implications for Policy and Scope for Further UK Research , 2006 .

[25]  R. Shimer.  The Cyclical Behavior of Equilibrium Unemployment, Vacancies, and Wages: Evidence and Theory∗ , 2002 .

[26]  G. Borjas.  The Relationship between Wages and Weekly Hours of Work: The Role of Division Bias , 1980 .