Events at CERGE-EI

Julia Cajal Grossi, Ph.D.

Geneva Graduate Institute, Switzerland

Authors: Julia Cajal Grossi and Gabriel Kreindler

Abstract: We study urban spatial frictions in the context of commuting in the garment-for-exports sector in Bangladesh, using detailed high–frequency data on garment workers’ employment. We show several stylized facts consistent with severe spatial frictions. First, export shocks to garment plants increase hiring at the plant, and also induce churning of workers in nearby plants. Second, most home-work commutes are on foot and very short, despite workers’ reported willingness to commute longer distances for better pay. Third, worker switches between factories are valuable and also typically local. Fourth, workers have sparse and local information about job opportunities. We set up a partial equilibrium model of workplace choice where we distinguish between commuting costs and limited information about job availability, two forces that we seek to disentangle. We estimate that information frictions account for a sizeable share of the observed decay of commuting with distance, and we discuss implications of this type of frictions.