To what extent does commuting reduce regional wage disparities? This question is
addressed by estimating two sets of earnings functions (based on 2000 LFS data for
Estonia, Latvia and Lithuania): with geographical variables (like capital city, rural etc.)
measured at the workplace and at the place of residence. The main finding is that in
Estonia and Latvia commuting has significantly narrowed the ceteris paribus wage gap
between capital city and rural areas, as well as between capital and other cities. In
Lithuania only residents of urban areas in the capital county manage to catch up
significantly with the capital, while overall urban-rural gap remains almost unchanged.
Individual gains to commuting are uniformly big in Latvia but on average negligible in
Lithuanian urban areas.
Other things equal, likelihood of commuting between municipalities increases with
education level and decreases with age. Males and rural residents are more likely to
commute; it is true also for ethnic minorities in Lithuania and in Latvian urban areas.
Wages and probability of commuting in Latvia fall when one moves further away from
the capital city. Analysis of spatial patterns of commuting in the three countries reveals
some noteworthy differences.