Michael Siegenthaler

We study a reform that granted European cross-border workers free access to the Swiss labor market. Our Differences-in-Differences estimations leverage the fact that regions close to the border were affected more intensely and earlier. The greater availability of cross-border workers increased their employment but also wages and possibly employment of highly educated native workers although the new cross-border workers were also highly educated. The reason is a simultaneous increase in labor demand in skill-intensive firms: the reform increased the size, productivity, innovation performance of some incumbent firms, attracted new firms, and created opportunities for natives to pursue managerial jobs.

This paper estimates the intertemporal labor supply (Frisch) elasticity of substitution exploiting an unusual tax policy change in Switzerland. In the late 1990s, Switzerland switched from an income tax system where current taxes were based on the previous two years' income to a standard annual pay as you earn system. This transition created a two-year long, salient, and well-advertised tax holiday. This change occurred both for the federal and local income taxes. Swiss cantons switched to the new regime at different points in time during the 1997--2003 period. Exploiting this variation in timing and using population-wide administrative social security earnings data matched with census data, we identify the Frisch elasticity. We find significant but quantitatively small responses of earnin...