Costly Commuting and the Job Ladder

Abstract:

I study the interaction between commuting and employment in the data and within a spatial model of on-the-job search. I document the correlation between commuting time, job-to-job transitions, and earnings empirically. The theoretical model features a labor market in which individuals must commute in order to work, explicitly taking into account the distributions across space and employment states. Wages and rent are jointly determined endogenously, giving rise to sorting across jobs and space. The rate of job-to-job transitions and wage gains within and between jobs depend crucially on the spatial elements of the model.  The calibrated model quantifies the costs of commuting on individual wage profiles and aggregate labor market outcomes.  Counterfactual analysis shows that declines in commuting costs accompanying the rise of working remotely affect location choices and wage growth at the individual level, and employment, rent, and output in the aggregate.