(with Christian Kleinertz and Klaus Nowotny)
We study a cross-border commuting reform that granted German workers in the German-Swiss border region access to the high-wage Swiss labour market. This exogenous increase in German workers‘ outside option led to an increase in average wages paid by German establishments in the border region. But this wage increase is not homogenous across worker types. First, high-skilled workers enjoyed a higher wage increase than low-skilled workers, consistent with a stronger increase in Swiss-labor demand for high-skilled German workers. Second, the positive wage effects only accrue to men in the border region, but not women, consistent with gender differences in the willingness to commute. The outside option clearly seems to play an important role in wage negotiations and its wage effects can be heterogeneous.