Is there loss aversion in the trade-off between wages and commuting distances?

Publication date: Available online 12 February 2020Source: Regional Science and Urban EconomicsAuthor(s): Wolfgang Dauth, Peter HallerAbstractWe exploit administrative data on exact commuting distances for a large sample of German employees and study the relation of commuting and wages. We focus on the question of whether job changers are loss averse in trading off wages and commuting distances. We find that the willingness to pay for a reduction of the commuting distance is at least as large as the wage increase job changers require to accept an increase in their commute by the same distance. This non-experimental field evidence contradicts the experimental finding of loss aversion and even suggests the existence of reverse loss aversion. One quarter of the positive relationship between wages and commuting can be attributed to the sorting of workers into certain firms at various distances and the remainder to a match-specific wage component that workers and firms bargain over.

Source: Regional Science and Urban Economics - February 12, 2020 Category: Science Source Type: research