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

64 Pages Posted: 22 Jan 2020

See all articles by Aline Bütikofer

Aline Bütikofer

University of Bern

Katrine Vellesen Løken

Norwegian School of Economics (NHH) - Department of Economics

Alexander Willén

Norwegian School of Economics (NHH)

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.

Keywords: labor market expansions, wages, distributional consequences

JEL Classification: J3, J61

Suggested Citation

Bütikofer, Aline and Løken, Katrine Vellesen and Willén, Alexander, Building Bridges and Widening Gaps: Wage Gains and Equity Concerns of Labor Market Expansions. IZA Discussion Paper No. 12885. Available at SSRN: https://ssrn.com/abstract=3521703

Aline Bütikofer (Contact Author)

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

Katrine Vellesen Løken

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

Alexander Willén

Norwegian School of Economics (NHH)

Helleveien 30
Bergen, NO-5045
Norway

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