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 rel ated dynamic discrete choices, as both moves involve a change of commuting distance. This suggests that labour and residential mobility are mutually d ependent and should be simultaneously analysed, based on a theory which inc orporates these dynamic decisions explicitly. In the present paper, we base our analysis on search theory and choose the point of departure that indiv iduals maximise utility by moving through different labour market and housi ng market states, while taking into consideration that moving from one stat e to another is costly. Based on these assumptions, a search model is const ructed and the optimality conditions are derived. One of main conclusions based on the search model is that the effect of fac tors which cause housing market imperfections (viz. the residential moving costs and the residence arrival rate) have ambiguous effects on he job acce ptance and job search behaviour of employed individuals. For some interesti ng cases however, the effect of the residential moving costs on the job acc eptance behaviour can be derived. In contrast, the effect of housing market imperfections on the labour market behaviour of nonemployed persons is det ermined. We find for example that housing policies which discourage nonempl oyed persons to move residence (e.g. housing subsidies) also decrease the p robability of becoming employed and may therefore unintentionally increase the number of nonemployed persons.