Papers and projects

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 importing account for 8% and 13% of the observed price jump, respectively. The remaining price discrepancy is explained by differences in productivity and amenities.

This paper quantifies welfare and fiscal effects of highway congestion relief in Luxembourg, the EU’s largest cross-border labor market, where over 220,000 workers commute daily from France, Belgium, and Germany. We embed recursive logit route assignment in a quantitative spatial general equilibrium model, so that travel times respond endogenously to the counterfactual allocation of workers and firms. Doubling highway capacities reveals that cross-border commuter towns gain the most. Due to land appreciation, Luxembourg City residents also gain, although by less than the commuting periphery. In the closed-city equilibrium, the average welfare gain is €1,366 per resident per year. Fiscal gains are substantial: since labor income earned in Luxembourg is taxed at source, Luxembourg’s annual tax revenue rises by €0.52 billion in the closed-city equilibrium and by €1.20 billion once the long-run migration response is accounted for.