Cross-Border mobility, HOUSing market developments, INcome Growth

CRHOUSING aims to develop innovative tools to address three main scientific objectives. 1. To understand the causal effect of productivity growth, entrepreneurship and housing market developments on the size and the structure ??skill composition, origin mix, residential vs. non-residential mobility?? of cross-border flows of workers. 2. To assess the causal impact of cross-border labor mobility on the level and distribution of disposable income as well as on the well-being of the Luxembourg population. A large body of literature has shown that the average income and inequality responses to immigration combine labor market, fiscal, market size, productivity effects. Focusing on Luxembourg allows us to distinguish between immigrants and cross-border commuters ??the latter generate different fiscal effects, spend a fraction of their income in their country of residence, and contribute differently to the housing market developments?? and requires extending existing models to account for housing market responses ??as natural persons or through the business activities that they generate, cross-border workers put pressure on housing prices in Luxembourg and in cross-border regions?? as well as costs related to congestion or diversity. 3. To develop unified models allowing to predict the joined effect of various types of shocks and policy measures such as free access to public transports, effect of national research priorities oriented towards digital technologies and increasing need for highly skilled workers, massive investments in the national building stocks.

This project aims to uncover the interdependencies between economic concentration, labor mobility, housing market developments and inequality. It focuses on the economy of Luxembourg and the Greater Region, characterized by high economic growth, booming housing prices and dynamic labor mobility (through both immigration and cross-border commuting), features that can also be observed in other regional poles of growth around the world. The project aims to shed light on the sustainability, drivers and distributional effects of the core-periphery developments observed in the Greater Region. This requires to collect and merge data from several sources as well as to develop state-of-the-art empirical and theoretical methods to understand causation links and interactions between variables. The project proceeds in three steps. A first work-package focuses on the determinants of labor mobility and consists of two tasks: (i) collecting and harmonizing data on cross-border mobility, housing prices, economic opportunities in the Greater Region between 2005 and 2020; (ii) developing an empirical strategy to understand workers’ joint decision to commute or to change residence. A second work-package examines the welfare and distributional impacts of labor mobility and the implied housing market developments by: (i) empirically assessing the role of massive labor inflows on the domestic labor market, (ii) estimating the effects of economic growth and labor mobility on real estate prices. Finally, the last work-package explores the interdependencies between growth, labor mobility and housing market developments in a general equilibrium setting. It consists of two tasks: (i) quantifying the welfare and distributional implications of the Luxembourg “growth miracle” using a macroeconomic model accounting for various interactions; (ii) using the model to anticipate future trends and investigate the consequences of policy reforms as well as changes in the sociodemographic and economic environments in the Greater Region.