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Title:Labour supply and commuting PDF Logo
Authors:Gutiérrez-i-Puigarnau, Eva
van Ommeren, Jos
Issue Date:2010
Series/Report no.:IZA Discussion Papers 4798
Abstract:A new paradigm for transport economists has been established: revenues of a welfare-maximising road tax should be employed to reduce the level of a distortionary income tax. An essential modelling assumption to reach this conclusion is that the number of workdays is optimally chosen, whereas daily workhours are fixed, implying that given a road tax, workers may only reduce their commuting costs by reducing total labour supply. However, a labour supply model which also allows for optimally chosen daily hours implies that commuting costs increase daily hours, whereas the effect on total labour supply is ambiguous. This paper addresses this issue empirically by analysing the relationship between labour supply patterns and commuting distance using the socio-economic panel data for Germany between 1997 and 2007. Endogeneity of commuting distance is accounted for by using employer-induced changes in commuting distance. In line with the theoretical model developed, we find that commuting distance has a positive effect on daily hours. Our analysis does not find a negative effect of commuting distance on total labour supply, suggesting that a reduction in the income tax, as advocated in the literature, may not be necessary.
Subjects:Commuting cost
congestion tax
labour supply
JEL:J22
R41
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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