Wage Differentials Between Natives and Cross-Border Workers Within and Across Establishments

Abstract

Luxembourg has a very unusual labor market, with only 29% of Luxembourgish nationals. The remaining workforce is composed of immigrants (27%) and cross-border workers (44%) who live in one of the three surrounding countries which are France, Germany and Belgium. Research on economic outcomes of immigrants has been a major focus of labor market research in many countries, but the cross-border population has only attracted scarce attention. Even though this topic is of limited relevance in most countries at the national level, similar situations as in Luxembourg can be found in regional and local labor markets in most other countries, around major cities for example. In this paper we use the example of Luxembourg to investigate the determinants of the wage gap between natives and cross-border workers. We first analyze whether this specific commuting workforce is concerned, like the non national population in many other labor markets, by segregation into low-wage firms. We then use a matched employer-employee dataset to investigate the role that firm-specific characteristics play in determining the wage gap. This approach opens interesting perspectives for expanding the literature on the native-immigrants wage gap.