Spatial Search and Commuting with Asymmetric Changes of the Wage Distribution

Abstract

This paper contributes to job-search literature by analysing commuter behaviour in the presence of asymmetric changes in the wage distribution. Job search theory predicts that reservation wages increase with the mean and mean-preserving spread of the wage distribution. However, changing dispersion while holding the mean constant implies symmetric stretching or compression of the wage distribution in both tails, which is not likely to be the case when confronted with the real data. The presented model predicts that the commuter stream and the reservation wage increase with the median-preserving spread in the right tail and decrease with the median-preserving spread in the left tail in the destination. The empirical part, based on German commuter data, confirms the theory's predictions. © Springer-Verlag Berlin Heidelberg 2010.