To Migrate or to Commute?

Stefan Gruber


In this paper, we investigate the agglomeration patterns in a New Economic Geography
model when commuting is allowed. The introduction of both commuting and housing
costs leads to a disentangling of the agglomeration of firms and people. Commuting allows
workers to continue living in agglomerations and enjoying the benefits of a larger
product variety, despite high housing costs, since they may choose to commute to another
place where they receive higher wages, which in turn enables them to cover high housing
costs at their place of living. This observation is especially true for skilled workers, who
generally are more mobile than unskilled workers.

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