Cross-border housing markets have become more prevalent in Europe since the establishment of the European Union. Using data from the functional urban area of Luxembourg, we document significant floorspace price discontinuities at the borders of Luxembourg with Belgium, France, and Germany. Employing a quantitative spatial urban model and spatial regression discontinuity techniques, we show that differences in tax rates and tax importation account for 9% and 17% of the observed price jump, respectively. The remaining price discrepancy is explained by differences in productivity and amenities.

This paper studies the effects of congestion relief in a spatial general equilibrium model of Luxembourg and its cross-border commuting zone. Using traffic speed data, we apply a difference-in-differences design on Luxembourg’s highways to measure congestion severity and identify choke points. We then simulate counterfactual scenarios where highway speeds are set to free-flow levels and track the resulting changes in output, welfare, and fiscal revenues. Economic output rises in Luxembourg City and Esch, while other cities lose production but gain in resident welfare. For residents of Luxembourg City, we estimate a short-run welfare loss of EUR 1,140 per person per year, which becomes a welfare gain of EUR 3,490 in the long run after population reallocation. When accounting for migration from the outside economy, the welfare effect in Luxembourg City turns negative at EUR 8,110 per person per year. The elimination of congestion induces a fiscal gain of EUR 2.50 billion per year in the short run, EUR 1.18 billion in the long run, and EUR 7.04 billion when accounting for migration inflows.

We develop a spatial general equilibrium model of commuting that embeds a radiation-style sequential job search into a framework with endogenous wages, amenities, and a density-dependent disamenity. Calibrated to granular data from Luxembourg and its cross-border region, the model captures heterogeneous mobility responses across occupations and countries. Counterfactual congestion relief reveals that lower commuting times can increase both wages and employment if the resulting expansion of the opportunity set intensifies competition for labor. The framework combines the tractability of quantitative spatial models with a realistic frictional labor market, enabling a detailed assessment of the interaction between transportation and the labor market in integrated regions.