Commute Costs and Labor Supply: Evidence from a Satellite Campus

Abstract

Whether, and how much, increased commute costs decrease labor supply is important for transport policy, city growth, and business strategies. Yet empirical estimates are limited and biased downward due to endogenous choices of residences, workplaces, commute modes, and wages. Using the transition of undergraduate teaching from a university’s urban to suburban campus we test how labor supply responds to a longer commute. Exogeneity is ensured because few faculty change residences, nearly all use a free shuttle, and we control for wages.Based on difference-in-difference estimates using individual changes in commute time, the 1.0 to 1.5-hour (40-kilometer) increase in round-trip commute time reduces annual undergraduate teaching hours by 53 (21%). Consistent with higher per-day commute costs, annual undergraduate teaching days decrease by 18 while daily undergraduate teaching hours increase by 0.16. Substitution to alternative work activities is minor: graduate teaching increases by a small amount and research output decreases significantly. These results imply work time is highly responsive to commute time for workers with flexibility. The university accommodated the reduced teaching time primarily by increasing class sizes implying that education quality declined. While larger classes may have increased preparation time outside class, we show that class size changes are only minimally correlated with the increased commute costs and do not confound our estimates.