Commute Costs and Labor Supply: Evidence from a Satellite Campus

Abstract

Whether, and how much, increased commute costs decrease labor supply is important for transport policy, city growth, and business strategies. Yet empirical estimates are limited and biased downward due to endogenous choices of residences, workplaces, commute modes, and wages. Using the transition of undergraduate teaching from a university’s urban to suburban campus we test how labor supply responds to a longer commute. Exogeneity is ensured because few faculty change residences, nearly all use a free shuttle, and we control for wages.

Based on difference-in-difference estimates using individual changes in commute costs, the 1.0 to 1.5-hour (40-kilometer) increase in round-trip commute time reduces annual undergraduate teaching hours by 22 (8.4%) implying an elasticity of work time or income with respect to commute time of -0.044. Consistent with higher per-day commute costs, annual undergraduate teaching days decrease by 18 (21%) and daily undergraduate teaching hours increase by 0.50 (16%). Substitution to alternative work activities is minor: graduate teaching is unaffected and research output decreases. The university accommodated the reduced teaching time primarily by increasing class sizes likely lowering education quality. Larger classes may have increased preparation time outside class but class size increases are only minimally correlated with individual commute costs and do not significantly confound our estimates.

Keywords: commuting, commute costs, labor supply, value of time, satellite campus

JEL Classification: J22, H43, R41, I23, I25 R11, R23