Using administrative employer-employee data from Germany, I exploit two reductions of tax breaks for commuting in 2003/4 and 2006/7 to estimate commuting costs’ effect
on the decision to switch job and move house. Standard theory predicts that higher commuting costs should lead to increased concentration in urban centers. However, I find that re-matching of existing jobs and houses to reduce commuting distances is much more prevalent in the data. With these estimates I calculate the effect of a complete abolition of the tax breaks on overall travel distance, fuel usage, greenhouse gas emissions, the tax base, and the de-population of the countryside.