Living in two worlds: A review of home-to-work decisions

This paper discusses various aspects of the economic analysis of commuting behavior. It starts with a review of two difficulties associated with urban economics models: the empirically falsified prediction of the relation between commuting time and income, and the presence of substantial excess commuting. Notwithstanding these anomalies, research that focuses directly on the value of travel time provides evidence that there is substantial resistance against commuting among large groups of workers. However, commuting costs are just one among many other explanatory variables for actual commuting behavior, and commuting itself has become much less onerous over time. This suggests that commuting costs play a much more limited role than has been assumed in the past. On the other hand, empirical evidence suggests that space is more important than one would be inclined to think on the basis of the considerations just given. These empirical regularities suggest that other space-related aspects of the functioning of urban labor and housing markets are more important than was previously thought.