We examine individual‐level compensating differentials for commuting distance in a quasi‐natural experiment setting by examining how wages respond to changes in commuting distance induced by firm relocations. This set‐up enables us to test for the relevance of job search frictions within labour market models. Due to the quasi‐experimental set‐up, we are able to avoid a range of endogeneity issues. We demonstrate that a 1 km increase in commuting distance induces an almost negligible wage increase in the year after the relocation but a more substantial wage increase of about 0.15% three years later.

We discuss the distribution of commuting distances and its relation to income. Using data from Denmark, the UK and the USA, we show that the commuting distance is (i) broadly distributed with a slow decaying tail that can be fitted by a power law with exponent g % 3 and (ii) an average growing slowly as a power law with an exponent less than one that depends on the country considered. The classical theory for job search is based on the idea that workers evaluate the wage of potential jobs as they arrive sequentially through time, and extending this model with space, we obtain predictions that are strongly contradicted by our empirical findings. We propose an alternative model that is based on the idea that workers evaluate potential jobs based on a quality aspect and that workers search for jobs sequentially across space. We also assume that the density of potential jobs depends on the skills of the worker and decreases with the wage. The predicted distribution of commuting distances decays as 1/r 3 and is independent of the distribution of the quality of jobs. We find our alternative model to be in agreement with our data. This type of approach opens new perspectives for the modelling of mobility.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may 13-2-2012 AbstractOne of the classic predictions of the urban economic theory is that high-income and low-income households choose different residential locations and therefore, conditional on workplace location, have different commuting patterns. Empirical tests of this theory are not standard, due to reverse causation and lack of good control variables. In the current paper, estimates of household income on commuting distance are derived using residential changes in distance for a given workplace, so reverse causation is eliminated. Our results show that the long-run income elasticity of commuting distance is positive and around 0.18. The results suggest that the elasticities are higher for single wage-earners than for dual wage-earners and higher for females than for males.

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