Commuting. A review of "Stress that Doesn’t Pay: The Commuting Paradox" by Stutzer and Frey (2008)


Literature Review, 2017

13 Pages, Grade: 1,7


Excerpt

Table of Content

1. Introduction

2. Literature on commuting and well-being in economics

3. The commuting paradox by Stutzer and Frey (2008)
3.1. Theory
3.2. Data and testing strategy
3.3. Main findings
3.4. Possible explanations for the commuting paradox

4. Methodological shortcomings

5. Summary and implications for policy and research

6. References

1. Introduction

Commuting describes the regular travel between residence and workplace. The morning and evening ritual is a time-consuming activity, which is often necessary in order to practice a profession but prevents from doing other more pleasant activities. For 54% of the EU employees it takes up to 30 minutes to commute to their place of work, 30% need 31 to 60 minutes and 16% need even more than one hour for one way, as the European Working Condition Survey recently reported (2015).

In addition to the loss in time, social scientists observe other private and social costs of commuting. The unpredictability of the daily journey leads to a high level of stress and impairs commuters’ physical and mental performance (Evans, Wener, & Phillips, 2002; Gottholmseder, Nowotny, Pruckner, & Theurl, 2009). Private and family life is compromised because of stress and time delays (Koslowsky, Kluger, & Reich, 2013). Individuals bear the financial burden of daily transport either by car, public transport or other means. For the society the long distances (especially by car) mean more pollution of the air. In contrast to these negative effects of commuting, other scholars highlight the positive aspects. Commuting provides time to work, to read newspapers or a book or to unwind after the workday. Further benefits include the transition from home to work and the clear cut off between both spheres of life (Redmond & Mokhtarian, 2001).

Personally, as a master student some months before graduation and entering the job market, I am highly interested in the decision regarding where to work and where to reside. Is commuting a wise decision and am I compensated for the stress? In order to answer the question comprehensively this paper reviews the research conducted by Stutzer and Frey (2008) about the “commuting paradox”. The authors use the standard urban location theory in economics to test weather commuters are fully compensated on the housing and job market by means of their reported well-being.

At first the reader is provided with an overview of the literature pertinent to our subject in order to classify Stutzer and Frey’s (2008) article within the different fields of research. The second paragraph presents the most important points of the article, such as the theory, data, testing strategy, main findings, and implications. The subsequent part focuses on its methodological weaknesses. This paper concludes with a short summary of the findings and suggests possible questions of further research.

2. Literature on commuting and well-being in economics

Commuting touched economics first when Becker (1965) included the travel from home to work in his well-known model of optimal time allocation. In the following decades, the commuting question entered various fields of economic research. In transport economics, for example, is the focus on commuter’s rational choice of transport mode. In line with the rational choice theory, commuters are expected to opt for the mode with the lowest transportation time and cost, see for example Van Ommeren and Dargay (2006). According to scholars of the urban economics households are located in a way to maximize the utility gained from housing and consuming other goods. In contrast to that, in an influential study Hamilton and Röell (1982) observed the so-called “wasteful” commuting, meaning that individuals tend to travel more than they need to. The insight was refuted to some extend by research conducted by Rouwendal and Meijer (2001). They found out that despite Dutch workers do not appreciate commuting they are still willing to accept longer travelling time and distances in order to satisfy their needs and preferences on the housing market. This can be seen as a confirmation that disutility stemming from the cost of commuting can be equalized by additional benefits of living in a pleasant area. In labour economics commuting is seen as a source of labour mobility. Commuting workers have access to geographical distant labour markets without the need to move or migrate (Eliasson, Lindgren, & Westerlund, 2003). In addition, commuting was integrated into models of job search and theories about wage compensation, see for example Simpson (1992) and Timothy and Wheaton (2001).

Next to commuting, this paper focuses on the economics of well-being. In a novel approach, research combines economics with other scientific disciplines like psychology and sociology. It can be seen as a shift from measuring well-being in terms of wealth or income like GDP (as assumed in classical economic theory) to a happiness maximizing approach. The field has grown significantly since the end of the last century and researcher have developed methods, surveys and indices to measure happiness. One of the main contributor was Bernard Van Praag, who quantified well-being and established the Leyden School of modern happiness economics in the seventies and eighties of the last century (Van Praag & Ferrer-i-Carbonell, 2004). From that time on, academic literature on happiness and well-being of the individual has been a prospering strand in economic research. On the individual level the “Easterlin Paradox” was a pioneering but highly contested concept introduced by Easterlin (1995) and on the societal level researchers explored connections between happiness and democracy (Frey & Stutzer, 2000). The subsequent section describes the research conducted by Stutzer and Frey in 2008 about investigating the relationship between individual subjective well-being and commuting.

3. The commuting paradox by Stutzer and Frey (2008)

The article challenges the classical economic theory by testing the correlation between commuting time and subjective well-being. The results point towards an inadequate compensation on housing and labour market for the stress induced by the daily travel. Hereinafter the theory and data used, the methodology applied, the results found and the corresponding implications are reviewed.

3.1. Theory

According to the classical urban location theory rational individuals chose to commute when they are compensated either on the labour market or on the housing market, thus their utility is equalized in the end. There are two underlying assumptions: First, houses located further away from job opportunities are expected to be less attractive and therefore are more inexpensive. Second, jobs that imply longer travels have to offer higher wages in order to attract employees. When all individuals optimize their choices, it is expected that all commuters are fully compensated for their travelling costs by lower rents and/or higher wages. Therefore commuter’s utility is equalized.

3.2. Data and testing strategy

The outlined theory is tested by the following explanatory research question: Is there a correlation between individual’s commuting time and their subjective well-being? The corresponding null hypothesis is there is no systematic correlation (ß=0, commuting time is entirely compensated by either higher salaries or lower rents for housing) and the alternative hypothesis is there is a systematic correlation (ß<0, commuting time is not fully compensated on labour and housing market). Evidence for the latter case means a refutation of the classical urban location theory in the context of commuting. The research design is an unbalanced panel study based on data of the German Socio-economic Panel (SOEP) between 1985 and 2003, a survey with a sample size of approximately 6,000 to 12,000 households. The independent variable, commuting time, was operationalized by the survey question “How long does it normally take you to go all the way from your home to your place of work using the most direct route one way only?”. The answers are given in minutes. The dependent variable, reported subjective well-being (used as a proxy for individual utility, happiness and life satisfaction are used interchangeably here) is quantified by the question “How satisfied are you with your life, all things considered?”. Respondents answer on a scale from 0 “completely dissatisfied” to 10 “completely satisfied”.

The authors developed a model, in which the commuter’s utility is growing with the consumption c of goods, services and housing and declining with the commuting time D, therefore U=u(c,D). This equation is expanded to income yi and rent ri for all individuals to Ui = u(yi,Di,ri)= and be differentiated into = + + = 0. The differentiation states that an increase in commuting time will have no effect on utility in the end. To test this prediction, a multiple regression analysis with control for individual characteristics is conducted. The pooled OLS includes the coefficient ß to quantify the change in utility due to change in commuting time and individual covariates Xi: ui=α+βDi+ yXi+ εi. These controlled covariates do not comprise labour income, because income is expected to be part of the compensation mechanism on job and housing markets that rational individuals receive for commuting. In a second step and in order to control for time-invariant unobservable characteristics of people, individual effects are included in the estimation. It is the fixed effects model. The model prevents non-sampling errors, which may lead to biased observations and spurious correlations. The Hausmann specification test shows that the fixed effects model is more precisely than the pooled OLS model.

3.3. Main findings

The pooled OLS without individual fixed effects disconfirms the null hypotheses on a 99 percent confidence level. Thus, people who spend more time commuting report lower satisfaction with their life. An increase in a person’s commuting time by one hour (with an initial commuting time of zero minutes) leads to a 0.284 point lower satisfaction of the scale from 0 to 10 (t=-9.2). This is approved by the individual specific fixed effects model, even when the results are slightly different. An increase in commuting time by one hour leads to a 0.2 point decrease in life satisfaction (t=-3.99). As revealed by both regressions, individuals who experience longer commuting time report lower subjective well-being in a systematic manner. The null hypothesis needs to be rejected. This result is paradoxical because it is contrary to what classical urban location theory predicts.

In addition, Stutzer and Frey examine the effect of commuting distance and the means of transportation on subjective well-being. The former is an alternative proxy for commuting time but the authors assume a smaller accuracy. The negative effect of means of commuting distance is significant, but smaller compared to the one for commuting time. The latter tests the correlation and between commuting time and satisfaction with life for those individuals who travel either by public transport, by car or by other transportation means. The reported negative effect of using public transport turns out to be larger than the negative effect of commuting by car, though both are not statistically significant. In a last step the authors calculated the monetary compensation a commuter must be paid in order to report the same level of well-being as a non-commuter. A full compensation for commuting 22 minutes from home to work (average commuting time) demands 469.19 Euros extra or 35.4% of monthly wage.

[...]

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Details

Title
Commuting. A review of "Stress that Doesn’t Pay: The Commuting Paradox" by Stutzer and Frey (2008)
College
Leuphana Universität Lüneburg
Grade
1,7
Author
Year
2017
Pages
13
Catalog Number
V445276
ISBN (eBook)
9783668825840
ISBN (Book)
9783668825857
Language
English
Keywords
commuting, stress, doesn’t, paradox, stutzer, frey
Quote paper
Anna-Lena Prüser (Author), 2017, Commuting. A review of "Stress that Doesn’t Pay: The Commuting Paradox" by Stutzer and Frey (2008), Munich, GRIN Verlag, https://www.grin.com/document/445276

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