Labour supply and commuting revisited

According to theory, road pricing may reduce welfare when labour supply is negatively distorted by an income tax. This effect particularly occurs when commuting costs reduce labour supply. We examine the hypothesis that commuting costs reduce labour supply in the short-run. In particular, we estimate the effect of commuting time on labour supply in the UK. We account for endogeneity of commuting time by employing exogenous changes in commuting time resulting from firm relocations and changes in infrastructure. Our results cast doubt on the idea that increases in commuting cost reduce labour supply, at least in the short-run. More precisely, we find that females’ labour supply reacts positively to or is unaffected by increases in commuting time, whereas males’ labour supply is unaffected.