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The Labor Market Effects of Opening the Border: Evidence from Switzerland

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Abstract

Between 1999 and 2004 Switzerland fully opened its border region (BR) to cross-border workers (CBW), who are foreign residents commuting to Switzerland for work. In this paper, we exploit the timing of implementation and the fact that CBW commute almost exclusively to municipalities close to the border to estimate the effect of this policy on foreign labor supply and on native labor market outcomes, using a difference-in-difference approach. We find that opening the border to CBW increased their employment within 10 minutes of commuting time from the border by 4 to 5 percentage points. The increased inflow was mainly constituted of highly-educated workers and it was associated with an increase of wages of highly-educated Swiss workers and no significant changes of wages of other workers. We also find weak evidence that employment and hours worked by less educated native workers increased. Native highly-educated workers became more likely to fill top managerial positions after the liberalization and they became more likely to stay in border regions. Occupation upgrading and complementarity with highly-educated natives, particularly strong in highskilled manufacturing and knowledge-intensive services, contribute to explaining these effects of CBW on natives.

Suggested Citation

  • Andreas Beerli & Giovanni Peri, 2017. "The Labor Market Effects of Opening the Border: Evidence from Switzerland," KOF Working papers 17-431, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:17-431
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    File URL: http://dx.doi.org/10.3929/ethz-b-000169157
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    Cited by:

    1. Rosa Sanchis-Guarner, 2017. "Decomposing the Impact of Immigration on House Prices," SERC Discussion Papers 0223, Spatial Economics Research Centre, LSE.
    2. Jan Ruffner & Michael Siegenthaler, 2016. "From Labor to Cash Flow? The Abolition of Immigration Restrictions and the Performance of Swiss Firms," KOF Working papers 16-424, KOF Swiss Economic Institute, ETH Zurich.
    3. Piera Bello, 2017. "Exchange rate fluctuations and border crossings: evidence from the Swiss-Italian border," IdEP Economic Papers 1701, USI Università della Svizzera italiana.
    4. East, Chloe N. & Luck, Philip & Mansour, Hani & Velasquez, Andrea, 2018. "The Labor Market Effects of Immigration Enforcement," IZA Discussion Papers 11486, Institute for the Study of Labor (IZA).
    5. Angela Parenti & Cristina Tealdi, 2017. "Does the abolition of border controls boost cross-border commuting? Evidence from Switzerland," Discussion Papers 2017/213, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    6. Suphanit Piyapromdee, 2017. "The Impact of Immigration on Wages, Internal Migration and Welfare," PIER Discussion Papers 69, Puey Ungphakorn Institute for Economic Research, revised Sep 2017.
    7. Clemens, Michael A. & Lewis, Ethan Gatewood & Postel, Hannah M., 2017. "Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion," IZA Discussion Papers 10512, Institute for the Study of Labor (IZA).
    8. Zeno Adams & Kristian Blickle, 2018. "Immigration And The Displacement of Incumbent Households," Working Papers on Finance 1809, University of St. Gallen, School of Finance.
    9. Basso, Gaetano & Peri, Giovanni, 2015. "The Association between Immigration and Labor Market Outcomes in the United States," IZA Discussion Papers 9436, Institute for the Study of Labor (IZA).
    10. Morales, Juan S., 2018. "The impact of internal displacement on destination communities: Evidence from the Colombian conflict," Journal of Development Economics, Elsevier, vol. 131(C), pages 132-150.
    11. K. Burggraeve & C. Piton, 2016. "The economic consequences of the flow of refugees into Belgium," Economic Review, National Bank of Belgium, issue i, pages 43-61, June.
    12. repec:eee:jmacro:v:52:y:2017:i:c:p:118-134 is not listed on IDEAS

    More about this item

    Keywords

    border region; free labor mobility; policy change; cross-border workers; labor markets;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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