Spatial Mismatch and Costly Suburban Commutes: Can Commuting Subsidies Help?

Proponents of the spatial mismatch hypothesis argue that job decentralisation harms low-income residents of central cities because of barriers that limit their access to suburban labour markets. Such barriers can take the form of housing discrimination, exclusionary zoning or long and difficult commutes. This paper uses an urban equilibrium model of spatial mismatch to analyse the impact of commuting subsidies on the welfare of low-income, central-city households with restricted mobility. Specifically, it seeks to determine how effective such subsidies are at reducing the welfare impact of spatial mismatch. While subsidised outward commuting is found to raise the welfare of the low-income households, the welfare gains are only a small portion of the welfare loss due to spatial mismatch.