Job mobility, residential mobility and commuting: A theoretical analysis using search theory

The decision to move job and the decision to move residence are closely related dynamic discrete choices, as both moves involve a change of commuting distance. This suggests that labour and residential mobility are mutually dependent and should be simultaneously analysed, based on a theory which incorporates these dynamic decisions explicitly. In the present paper, we base our analysis on search theory and choose the point of departure that individuals maximise utility by moving through different labour market and housing market states, while taking into consideration that moving from one state to another is costly. Based on these assumptions, a search model is constructed and the optimality conditions are derived. One of main conclusions based on the search model is that the effect of factors which cause housing market imperfections (viz. the residential moving costs and the residence arrival rate) have ambiguous effects on he job acceptance and job search behaviour of employed individuals. For some interesting cases however, the effect of the residential moving costs on the job acceptance behaviour can be derived. In contrast, the effect of housing market imperfections on the labour market behaviour of nonemployed persons is determined. We find for example that housing policies which discourage nonemployed persons to move residence (e.g. housing subsidies) also decrease the probability of becoming employed and may therefore unintentionally increase the number of nonemployed persons.