How Does Improvement in Commuting Affect Employees? Evidence from a Natural Experiment

65 Pages Posted: 30 Sep 2019

See all articles by Yao Lu

Yao Lu

Tsinghua University - School of Economics & Management

Xinzheng Shi

Tsinghua University - School of Economics & Management

Jagadeesh Sivadasan

University of Michigan, Stephen M. Ross School of Business

Zhufeng Xu

Tsinghua University, School of Economics and Management

Date Written: August 25, 2019

Abstract

We collect rich worker month-level administrative panel data from two companies for a two-year period prior to and after the opening of a nearby subway station, which significantly improved public transportation commutes for a subset of workers. Consistent with a simple principal-agent model where improvement in commute reduces the cost of effort for workers, we find a significant difference-in-differences (DID) increase (12.6% of the standard deviation) in bonus pay (which is strongly correlated to worker-level performance measures) for affected workers relative to coworkers not impacted by the subway. The bonus increase is larger for workers with more variance in performance measures (marketing personnel and non-managers), is positively correlated with commute time saved, and lower for workers with access to technology that facilitated telecommuting. We do not find that improved performance is simply a result of affected workers spending extra time at the workplace. Additionally, we find a significant relative decline in monthly exit hazard (by about 50%) for affected workers, and evidence for higher quality (conditional on wages) of new hires from affected areas. Supplementary event study analysis using a large sample of subway construction commencements suggests that shareholder value is also positively impacted by access to a nearby subway.

Keywords: labor productivity, transportation, principal-agent, worker turnover, incentives

JEL Classification: H54, J63, J24, J22

Suggested Citation

Lu, Yao and Shi, Xinzheng and Sivadasan, Jagadeesh and Xu, Zhufeng, How Does Improvement in Commuting Affect Employees? Evidence from a Natural Experiment (August 25, 2019). Available at SSRN: https://ssrn.com/abstract=3456299 or http://dx.doi.org/10.2139/ssrn.3456299

Yao Lu

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Xinzheng Shi

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Jagadeesh Sivadasan (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Zhufeng Xu

Tsinghua University, School of Economics and Management ( email )

Beijing, 100084
China

HOME PAGE: http://zhufengxu.com

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