Hard Traveling: Commuting Costs and Urban Unemployment with Deficient Labor Demand

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ESOC Working Paper No. 8

Commuting costs are widely believed to increase urban unemployment by exacerbating supply-side frictions. In many contexts, however, deficient demand for labor is a salient cause of unemployment. We model labor demand as exogenously constrained, predicting commuting cost shocks will generate countervailing spatio-distributional impacts summing to a null effect on aggregate urban unemployment. We find evidence for this using geospatial data from the West Bank, where demand is plausibly inhibited by political circumstances, and where Israeli army road obstacles adversely shocked Palestinian commuting costs. Our results suggest urban connectivity initiatives will struggle to stimulate employment in demand-depressed economies.