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

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  • Butikofer, Aline
  • Løken, Katrine
  • Willén, Alexander

Abstract

We exploit the construction of the Oresund 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

  • Butikofer, Aline & Løken, Katrine & Willén, Alexander, 2020. "Building Bridges and Widening Gaps: Wage Gains and Equity Concerns of Labor Market Expansions," CEPR Discussion Papers 14287, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14287
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    References listed on IDEAS

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    Keywords

    Equity Concerns; Labor Market Expansions; wages;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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