Alexander L.P. Willen, Norwegian School of Economics
"Building Bridges and Widening Gaps: Efficiency Gains and Equity Concerns of Labor Market Expansions"
We exploit the opening of a large bridge to study how access to a larger labor market aﬀects economic eﬃciency, and how these potential eﬃciency gains are distributed across workers. The bridge we study connected the third largest city of Sweden to the capital of Denmark, and led to a substantial increase in the labor market opportunities of Swedes. Using unique cross-country matched registry data, we ﬁnd that the bridge led to a large increase in cross-country commuting among Swedes, driven both by extensive and intensive employment responses. This commuting eﬀect translates into a signiﬁcant increase in the average wage of Swedes residing close to the bridge, providing strong evidence of an eﬃciency gain for individuals in Sweden. However, these eﬃciency gains are unevenly distributed across workers: the eﬀect is largest for high-educated men and smallest for low-educated women. Thus, the eﬃciency gains come at the cost of rising income inequality and an increase in the gender wage gap, both within- and across-households. These equity eﬀects are driven not only by diﬀerences in the propensity to commute, but also by occupational segregation.
Contact person: Casper Worm