Labour market consequences of temporary migration for the country of origin : A natural experiment based on France 

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Cross-border labour mobility decisions : The effect of complementarities in local labour markets

This chapter is co-written with Jean-Yves Lesueur and Mareva Sabatier

Introduction

The development of free movement areas, as the European Union (EU) and the Eu-ropean Free Trade Association (EFTA) 1, has contributed to increase labour mobility in Europe and in particular cross-border mobility. Indeed, the number of cross-border workers, defined by the European Parliament as « individuals who live in one EU or EFTA country and work in another (political criterion) to which they return as a rule daily or at least once a week (time criterion) », increases by about 138% between 2002 and 2017 in the EU-28/EFTA and reaches about 2.1 millions of workers (Eurostat, 2018). Although these cross-border workers represent only 0.9% of the EU-28/EFTA labour force in 2017, this figure is much higher in cross-border regions and can exceed 2% (Eurostat (2017) – Appendix n°1). This is even more pronounced at a more local level. For example, in France, the European country with the most cross-border wor-kers, cross-border workers sometimes represent up to 40% of the active population in a given territory (Garnier & Toutin, 2017).
The boom in cross-border mobility reveals almost integrated employment areas, stradd-ling a border (Buch et al., 2009). In these areas, cross-border labour mobility has si-gnificant impacts on local economies on both sides of the border (Kondoh, 1999). It offers new opportunities for the unemployed worker to find a job, for employees to change jobs, but also for employers to find workers. In addition, cross-border labour mobility benefits the local economy, mainly through wages across the border, often higher. However it can produce more negative effects such as competition for hiring harmful to local firms, an increase in pollution resulting from large flows of commuting and significant pressure on property prices. Given these significant economic impacts, there is a need to better understand the determinants of cross-border mobility deci-sions.
The literature has only recently taken up this question and highlights four main fac-tors that can explain these decisions : a) individual and family characteristics, such as gender, age, risk aversion (Nowotny, 2014), as well as the presence of children or other cross-border workers in the household (Gottholmseder & Theurl, 2007 ; Huber & No-wotny, 2013) ; b) location factors, in particular distance to the border, accessibility and quality of public transport services (Schiebel et al., 2015 ; Medeiros, 2019) ; c) cultural and informational factors, such as language differences or social ties (Van Houtum & Van Der Velde, 2004 ; Verwiebe et al., 2017) and d) differences in local labor markets, acting as pull and push factors (Mathä & Wintr, 2009 ; Pigeron-Piroth et al., 2018 ; Chilla & Heugel, 2019). This literature, mainly empirical, provides interesting avenues for understanding the decisions to be cross-border workers. However, it does not allow us to understand two key points.
First, the literature does not offer a theoretical framework ensuring that the me-chanisms underlying the border mobility decision are clarified. This is all the more surprising since work on migration (Lewis, 1954 ; Todaro, 1969 ; Harris & Todaro, 1970 ; Greenwood, 1975) and commuting decisions (Rouwendal & Meijer, 2001 ; Paet-zold, 2019) has long explored these mechanisms. However, these theoretical works allow either, in the case of work on international mobility, to characterize the definitive mo-bility decision in a rather international framework, or, in the context of commuting, to analyze daily mobilities at a local level without taking into account the specificity due to the presence of a border. However, the border by creating institutional, legislative and cultural differences can greatly modify traditional mobility mechanisms (Hasels-berger, 2014).
Second, the literature on cross-border mobility decisions has considered that speci-ficities of local labor markets are determinants of these decisions, but do not impact other determinants. However, this hypothesis contradicts all the stylized facts on bor-der mobility. The profile of cross-border workers is therefore very different depending on the geographic areas studied (Garnier & Toutin, 2017). One reason for these dif-ferences could be the specificities of local labor markets on each side of the border and their more or less strong asymetries or complementarities. Pires & Nunes (2018) thus highlights, from Portuguese data, the existence of fragmented labor markets ac-cording to the needs of companies in the destination country. Thus, the Norte de Portugal is providing low-qualified, low-paid workers, whereas Galicia is contributing with qualified and well-paid workers. These facts therefore plead for analyzes that are not aggregated, such as those of the literature, such as Mathä & Wintr (2009) for example, but on the contrary localized, making it possible to take into account finely the differences in local labor markets. This is all the more important in Europe as strong institutional differences influence mobility. In particular, mobility between the Schengen area countries is perfectly free, while mobility between the Schengen area countries and other countries such Switzerland are governed by bilateral agreements laying down specific arrangements, which may favor certain commuters.
As literature does not provided a theoretical framework that analyzes cross-border labour mobility decisions taking into account the potential complementary in local labour markets, we propose to fulfill these two gaps with a two-steps method. First, we construct a theoretical model in which workers in the home country choose between staying and moving. This choice depends on a trade-off between the costs (commuting time and cost, home prices) and the benefits (wages and employment opportunities). A comparative static analysis allows us to evaluate the theoretical impact of each va-riable on the decision to be a cross-border worker. To quantify each impact, we propose an empirical analysis, based on the French case. This case is particularly interesting as, in France, the number of cross-border workers increased by around 76% between 1999 and 2016 (Eurostat, 2017), making it the leading sending country in the Euro-pean Union. Using the data of the 2012 French Population Census (from the French National Institute of Statistics and Economic Studies), we analyze cross-border labour mobility decisions taking into account regional specificities. We then focus attention separately on mobilities to Luxembourg (in the Schengen context) and Switzerland (in particular bilateral agreement), the two main destinations of French cross-border wor-kers. This makes it possible to analyse labour market complementarities between the country of origin and the country of destination of cross-border workers, as migration policies in these countries are different.
The contribution of this paper is twofold. First, our theoretical model helps to fill the theoretical gap and identify the cross-border mobility decision in complementary labour markets. Second, our empirical estimates quantify the effect of each determi-nant, taking into account the potentiel regional specificities and complementarities in local labour markets.
This article is structured as follows : Section 1.2 introduces our theoretical model. Section 1.3 presents the empirical context and data, while section 1.4 provides the descriptive analysis. Section 1.5 presents the method and discusses the results. Fi-nally, section 1.6 concludes.

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Theoretical model

In order to identify the theoretical mechanisms that may explain the cross-border mobility decision, we propose to model this decision, assuming two border countries, home (H ) and foreign (F). The two countries are supposed to share the same language and the same culture so that there are no cultural costs to mobility.
Each representative worker living in the home country derives his utility from a compo-site consumption good (ci) and housing services (hi). Like Sorek (2009), we assume that preferences in the (ci, hi) space are represented by a Cobb-Douglas utility function : U(ci) = cαihβi where α+β=1. Each individual has the choice between two options : working in his country and working abroad as a cross-border commuter. Workers thus decide to distribute one unit of time between labour supply time and cross-border commuting time, the latter being denoted as Ti. The price of domestic housing ser-vices in the worker’s city of residence is denoted as ph, and the price of the composite good is normalized to one. Local labour markets specificities are captured through the wage level, wj, and unemployment rate uj, where j= h or j=f depending on the country in which the individual works. The level of unemployment benefits received by the worker in the home country if unemployed is denoted as r.

Table of contents :

1 Cross-border labour mobility decisions : The effect of complementarities in local labour markets 
1.1 Introduction
1.2 Theoretical model
1.3 Empirical context and data
1.3.1 Complementarities in local and transnational labour markets : some facts
1.3.2 Data
1.4 Descriptive analysis
1.5 Method and Results
1.6 Conclusion
2 Labour market consequences of temporary migration for the country of origin : A natural experiment based on France 
2.1 Introduction
2.2 Policy framework
2.3 Data
2.4 Empirical design
2.4.1 Methodological choice
2.4.2 Empirical strategy
2.5 Overall Results
2.6 Validity of RDiT and sensitivity analysis
2.6.1 Validity of the RDiT
2.6.2 Sensitivity to the firms characteristics
2.6.3 Geographic sensitivity
2.6.4 Individuals sensitivity for wage
2.7 Conclusion
3 The impact of cross-border labour mobility on real estate price trends : A natural experiment 
3.1 Introduction
3.2 Policy Framework : the Swiss case
3.3 Data and descriptive statistics
3.4 Empirical strategy
3.5 Overall Results
3.6 Sensitivity Analysis
3.6.1 Placebo tests
3.6.2 Time horizon
3.6.3 Time horizon and distance to border
3.6.4 Quality of apartments
3.7 Conclusion
Conclusion générale

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