Wages, Housing Prices, and Commutes

27 Pages Posted: 19 Sep 2013 Last revised: 29 Aug 2014

Multiple version iconThere are 2 versions of this paper

Date Written: August 28, 2014


Whereas economic theory suggests that, all else equal, workers should be willing to accept disamenities such as higher housing costs and longer commutes only if they are compensated with higher wages, little is known about the magnitude of these compensating differentials. In this paper I address this gap in the literature by estimating an empirical model of the relationship between wages, housing prices, and commutes that addresses the simultaneous determination of these variables. The results from the empirical models suggest that the wage premia associated with high housing costs and long commutes are substantial. Furthermore, results from baseline models reveal that estimates of these compensating differentials are seriously biased if endogeneity is not addressed.

Keywords: Compensating Differentials, Housing Costs, Commute Times

JEL Classification: J3, R3

Suggested Citation

Mayock, Tom, Wages, Housing Prices, and Commutes (August 28, 2014). Available at SSRN: https://ssrn.com/abstract=2327772 or http://dx.doi.org/10.2139/ssrn.2327772

Tom Mayock (Contact Author)

UNC Charlotte ( email )

Charlotte, NC 28223
United States

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