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Labour Market Integration: Consequences of Cross-Border Commuting

Periodic Reporting for period 1 - BRIDGE (Labour Market Integration: Consequences of Cross-Border Commuting)

Reporting period: 2019-01-15 to 2021-01-14

Free movement of people and a common labour market is one of the four main pillars underlining the single market of the EU. The central aim of the Europe 2020 strategy, is to promote “smart, sustainable and inclusive growth”. One of the flagship initiatives of the EU2020 strategy centers on the labour market with of focus on the labour market matching, e.g. through labour mobility. In 2016 around 92% of the EU-28 workforce resided and worked in the same region (NUTS 2), 7% commuted between regions while just under 1% of the workers were cross-border commuters. These low mobility figures are striking considering that over a third of the EU population lives in a border region. Hence, the potential for increased integration across borders is large but there is a gap in the knowledge on mobility through cross-border commuting.

In the past, data constraints have hindered research on cross-border commuters, but in project, BRIDGE, I am able to overcome those challenges. BRIDGE is at the forefront of this research by being the first study to merge and link employee-employer micro-data across borders. The main objective of BRIDGE is to open up the black box of increased economic and labor market integration across borders through cross-border commuting and trade. This core objective has been reached.

In addition thereto, we have the unique opportunity to look simultaneously at the impact of a large policy shock (Öresund Bridge) on labour market and firm outcomes in both Denmark and Sweden before and after the introduction of a physical connection between the two countries. This combination of a large policy shock and cross-country linked micro-data allows us to investigate a large array of potential research questions related to labour market and firm outcomes, integration, and regional development. The focus of BRIDGE is on how lower cross-border thresholds to labour mobility impacts economic outcomes of the commuter and the employers/firms hiring them.

BREXIT and the closure of borders related to refugee inflows in the EU has highlighted the importance of national borders. More specifically, project BRIDGE adds to the knowledge on cross-border workers and how large infrastructure projects can lead to increased integration and value for society at large.
The main focus of project BRIDGE has been to implement the merged and linked dataset between Denmark and Sweden. This task required much more work than anticipated and delayed the project. This process was hit with multiple delays and obstacles but was implemented successfully in May 2020.

The research focuses on both individual and firm-level outcomes. First, the research focuses on individual-level outcomes for cross-border commuters themselves and spillovers to non-commuters. Our preliminary results show that when a cross-border commuter from Sweden starts working in Denmark (living in Sweden) the Danes within the same firm-occupation benefit in terms of higher hourly wages. This suggests that cross-border workers are complementary to native workers. This is a new result and advances the state of the art. While these results are promising, they are only preliminary. The plan is to build on these initial results and investigate further how earlier work experience from Sweden (Denmark) impacts the spillovers to Danish (Swedish) workplaces. In addition, the aim is to investigate the impact when a cross-border commuter returns to work in the country of residence.

The second theme focuses on firm-level outcomes and in particular, the work has focused on how globalization and supply chains lead to shock propagation over borders. Hence, how do firms react to a shock to a known foreign trading partner in another country. Our preliminary results indicate a sizable propagation of shocks through the supply chain.

Work is ongoing on both individual and firm-level outcomes and working papers are to be released in 2022 and presented at events and conferences.
Project BRIDGE has constructed a merged and linked employee-employer dataset across countries which is a large innovative breakthrough, since it is to the best of my knowledge, the first dataset of its kind in the world. This project is expected to be ongoing for a few more years and building on the datasets constructed I expect my research agenda in the next 5 years to almost solely consist of research utilizing the database constructed for this project.

The local importance of project BRIDGE was highlighted by border controls that were introduced at the Öresund Bridge following the European Refugee Crisis and during the Covid-19 pandemic. There are ongoing investigations in relation to building a metro-line between Copenhagen and Malmö to complement the Öresund Bridge. The potential impact of project BRIDGE on that and similar projects are large.

Project BRIDGE has the potential to have a large impact as it investigates in a unique fashion how countries become more and more integrated over time through large infrastructure projects. Examples of such ambitious projects that could be impacted are the TEN-T connecting Europe plan which includes over 30 cross-border bottlenecks (e.g. tunnel from Austria to Italy and Fehmarn Belt Fixed link between Denmark and Germany).
BRIDGE homepage, part of fellows homepage.