The labour market and commuting: The importance of search frictions and transport-related fringe benefits

Canonical urban models treat the labour market as frictionless and therefore imply full compensation for commuting costs. Given job search frictions, workers accept jobs that do not fully compensate for commuting costs. As a result, commuting distances become longer and affect labour market outcomes, including wages, in a way not predicted by frictionless models. Special attention is given to the role of transport-related fringe benefits, including employer-provided parking and company cars, which further increase commuting distances via tax-induced distortions.