This paper studies the effects of commuting and moving costs on job creation and job mobility within an extended Pissarides-style spatial search and matching model. The analysis connects three strands of literature: commuting and job search, commuting and home moving and the housing liquidity issue. The paper also examines how housing market frictions, commuting distance and relocation costs shape labor market outcomes and workers' spatial allocation across regions.
The paper develops a theoretical search and matching model à la Pissarides with two regional labor markets and a housing market characterized by search frictions. Workers can commute or relocate when receiving outside job offers. The housing market equilibrium is modeled through the interaction between house prices and time-on-the-market. The framework is further extended to account for heterogeneous workers, heterogeneous housing quality and the effects of transport policies and housing externalities.
The analysis shows that commuting costs increase reservation wages, reduce job creation and raise unemployment. Moreover, commuting costs distort the spatial allocation of workers across regions. Relocation can improve job mobility, but it depends on housing liquidity and housing market frictions. At the aggregate level, moving decisions generate congestion externalities that worsen housing liquidity and reduce future mobility opportunities. The model also predicts higher housing prices and trading frictions in areas with better job opportunities and higher-quality housing.
The model is intentionally stylized and does not fully capture the complexity of real cities, such as detailed household sorting, heterogeneous transport networks, or institutional differences across housing systems. Nevertheless, the framework provides a tractable theoretical foundation for studying the interaction between labor mobility and housing market frictions. The paper also suggests several extensions that may improve the empirical realism of spatial search and matching models.
The paper highlights important trade-offs for policymakers. Policies that improve accessibility and neighborhood quality may increase housing prices and reduce affordability. At the same time, housing market frictions and limited housing liquidity can restrict labor mobility and reduce access to better employment opportunities. Therefore, labor market efficiency depends not only on job creation policies, but also on housing market conditions, transport infrastructure and urban policies affecting residential mobility.
The paper contributes to the literature by integrating commuting, relocation and housing liquidity into a unified Pissarides-style spatial framework. Unlike previous studies, it explicitly models the housing liquidity issue through a search and matching approach to the housing market and links time-on-the-market dynamics to labor mobility. The paper suggests a theoretical explanation of how moving congestion and housing market frictions may generate aggregate negative externalities affecting job mobility and unemployment.
