Wages and Commuting: Quasi-natural Experiments' Evidence from Firms that Relocate

Ismir Mulalic, Jos N. Van Ommeren, Ninette Pilegaard

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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.
Original languageEnglish
Title of host publication10th IZA/SOLE Transatlantic Meeting of Labor Economists
Publication date2011
Publication statusPublished - 2011
Externally publishedYes
Event10th IZA/SOLE Transatlantic Meeting of Labor Economists 2011 - Buch/Ammersee, Germany
Duration: 26 May 201129 May 2011
Conference number: 10


Conference10th IZA/SOLE Transatlantic Meeting of Labor Economists 2011
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