Commuting, the Labor Market, and Wages

Commuting connects labor and housing markets. Commuting patterns are not efficient in the sense that they minimize the total distance traveled or the travel time spent. However, the excess commuting time results from heterogeneity, idiosyncratic preferences, and responses to friction on the labor and housing markets. Viewed from this perspective, commuting allows workers to switch jobs without having to move in dense labor markets and enables them to combine working in highly productive employment centers with living in attractive residential environments. Indeed, high commuting costs may be prohibitive for the emergence of the large concentrations of employment present in many modern metropolises. The main insight from the monocentric model—that lower transportation costs facilitate decentralization through more housing consumption and longer commutes—remains valid. Commuting plays a useful role in short run adjustments to local shocks as it facilitates adjustments to labor demand without residential mobility. Such shocks thus cause a “ripple” effect through connected local labor markets.