Commuting, migration, and local employment elasticities

Ferdinando Monte, Stephen J. Redding, Esteban Rossi-Hansberg

Research output: Contribution to journalReview articlepeer-review

115 Scopus citations

Abstract

We provide theory and evidence that the elasticity of local employment to a labor demand shock is heterogeneous depending on the commuting openness of the local labor market. We develop a quantitative general equilibrium model that incorporates spatial linkages in goods markets (trade) and factor markets (commuting and migration). We quantify this model to match the observed gravity equation relationships for trade and commuting. We find that empirically- observed reductions in commuting costs generate welfare gains of around 3.3 percent. We provide separate quasi- experimental evidence in support of the model's predictions using the location decisions of million dollar plants.

Original languageEnglish (US)
Pages (from-to)3855-3890
Number of pages36
JournalAmerican Economic Review
Volume108
Issue number12
DOIs
StatePublished - Dec 2018

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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