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


  • We thank Mogens Fosgerau and Bruno De Borger, two anonymous referees and Steve Pischke for useful suggestions on earlier drafts. Seminar participants at the 10th IZA/SOLE Transatlantic Meeting of Labor Economists, 5th Kuhmo-Nectar Conference, NECTAR 2011 conference, SERC Annual conference (London School of Economics), Department of Economics at the University of Copenhagen and DTU Transport at the Technical University of Denmark also provided helpful comments. We are grateful to Statistics Denmark for providing the data. Research support from the Danish Council for Strategic Research is acknowledged.


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.