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Building Bridges and Widening Gaps: Wage Gains and Equity Concerns of Labor Market Expansions

Author

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  • Bütikofer, Aline

    (Norwegian School of Economics)

  • Loken, Katrine Vellesen

    (Norwegian School of Economics)

  • Willén, Alexander

    (Norwegian School of Economics)

Abstract

We exploit the construction of the Öresund bridge, which connects a medium-sized city in Sweden to the capital of Denmark, to study the labor market effects of gaining access to a larger labor market. Using unique cross-country matched registry data that allow us to follow individuals across the border, we find that the bridge led to a substantial increase in cross-country commuting among Swedish residents. This effect is driven both by extensive and intensive margin employment responses, and translates into a 15% increase in the average wage of Swedish residents. However, the wage effects are unevenly distributed: the effect is largest for high-educated men and smallest for low-educated women. Thus, the wage gains come at the cost of increased income inequality and a widening of the gender wage gap, both within- and across-households. We show that these inequality effects are driven not only by differences in the propensity to commute, but also by educational specialization.

Suggested Citation

  • Bütikofer, Aline & Loken, Katrine Vellesen & Willén, Alexander, 2020. "Building Bridges and Widening Gaps: Wage Gains and Equity Concerns of Labor Market Expansions," IZA Discussion Papers 12885, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12885
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    Cited by:

    1. Ria Ivandic & Anne Sophie Lassen, 2023. "Gender Gaps From Labor Market Shocks," Upjohn Working Papers 23-387, W.E. Upjohn Institute for Employment Research.
    2. Dicarlo, Emanuele, 2022. "How Do Firms Adjust to Negative Labor Supply Shocks? Evidence from Migration Outflows," IZA Discussion Papers 14994, Institute of Labor Economics (IZA).
    3. Ivandić, Ria & Lassen, Anne Sophie, 2023. "Gender gaps from labor market shocks," Labour Economics, Elsevier, vol. 83(C).
    4. Emanuele Dicarlo, 2022. "How do firms adjust to a negative labor supply shock? Evidence form migration outflows," Temi di discussione (Economic working papers) 1361, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    distributional consequences; wages; labor market expansions;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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