Residential Location, Job Location, and Wages: Theory and Empirics

I develop a stylized partial on-the-job equilibrium search model which incorporate a spatial dimension. Workers reside on a circle and can move at a cost. Each point on the circle has a wage distribution. Implications about wages and job mobility are drawn from the model and tested on Danish matched employer-employee data. The model predictions hold true. I find that workers working farther away from their residence earn higher wages. When a worker is making a job-to-job transition where he changes workplace location he experiences a higher wage change than a worker making a job-to-job transition without changing workplace location. However, workers making a job-to-job transition which makes the workplace location closer to the residence experiences a wage drop. Furthermore, low wage workers and workers with high transportation costs are more likely to make job-to-job transitions, but also residential moves.