Beyond Lost Earnings: Job Displacement and the Cost of Commuting

This paper studies the scarring effect of job displacement on workers’ commuting costs to subsequent jobs. Using matched German employee-employer data, geo-coordinates of workers’ residences and workplaces, and a matched event study design, we estimate the response of workers’ commuting distances to job displacement in mass layoffs. After displacement, workers take up jobs that require 21 percent longer commuting, and the effect persists in the subsequent 10 years. To quantify the monetary value of increased commuting, we develop an on-the-job search model and structurally estimate workers’ willingness to pay to avoid commuting. The extra commuting cost amounts to one-fifth of the wage losses facing displaced workers, thereby exacerbating the total cost of job displacement.