Technological advances in recent years have led to a growing number of fast, electronic means of payment available to consumers for everyday transactions, raising questions for policymakers about the role of the public sector in providing a digital payment instrument for the modern economy. From a theoretical standpoint, the introduction of a central bank digital currency (CBDC) raises long-standing questions relating to the provision of public and private money (Gurley and Shaw 1960), and the ability of the central bank to use CBDC as a means for transmitting monetary policy directly to households (Tobin 1985).
I show empirically that commuting time affects job acceptance, suggesting large indirect costs of traffic congestion. To quantify congestion's effect on the labor market, I build a model of frictional job search within a metropolitan area. Workers evaluate job offers based on productivity and commuting costs, taking congestion as given, but by accepting and commuting to distant jobs, affect others' labor market outcomes. Equilibrium employment transitions and wages are tightly linked to congestion. Calibrating the model to the London area, the congestion externality significantly decreases welfare and increases wage inequality. I show that the stronger are search frictions, the smaller are the welfare gains from a congestion tax. (JEL E24, J32, J62, R13, R41)
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