Cross-border commuting and consuming: an empirical investigation

ABSTRACT

This article contributes to our understanding of cross-border activity in general and the determinants of cross-border trade in particular by focusing on the part of cross-border sales that arise due to work-related cross-border crossings of households. We analyse empirically how cross-border consumption expenditures vary across product and services categories as well as household characteristics using representative household survey data of cross-border commuters to Luxembourg. In total, these households spend an estimated 17% of their gross annual income across the border, contributing about 10% to the total household final consumption expenditure (HFCE) in Luxembourg. Cross-border expenditure is linked to individual- and household-related characteristics and to distance between home and work. Cross-border commuters systematically exploit arbitrage opportunities that arise because of existing price level (index) differences between the country of work and the country of residence.

KEYWORDS:

• Cross-border shopping
• commuting
• consumption
• expenditure
• households
• arbitrage

JEL CLASSIFICATION:

• D12
• R12
• R23
• J61

Acknowledgements

We would like to thank two anonymous referees, our discussants G. Felbermayr at the EGIT workshop in Berlin and F. Andersson at the annual SNEE conference in Mölle, as well as seminar participants at the BCL and participants at the Eurosystem HFCN research seminar in Vienna for their comments.

Disclosure statement

This article should not be reported as representing the views of the BCL or the Eurosystem. The views expressed are those of the authors and may not be shared by other research staff or policymakers in the BCL or the Eurosystem.

Notes

¹ The Grande-Region covers five regions (Saar, Lorraine, Luxembourg, Rhineland-Palatinate and Wallonie) at the intersection between France, Germany, Luxembourg and Belgium.

² See also Keen (2002) and Leal, López-Laborda, and Rodrigo (2010) for a survey of the literature.

³ See, for example, Keen (2002) or Leal, López-Laborda and Rodrigo (2009) for a review.

⁴ For a detailed case study on cross-border fuel tourism at the Luxembourg–German border (in the commune of Mertert-Wasserbillig), see Naumann (2005).

⁵ For a detailed description of the weighting procedure, see appendix 2.4 of the technical report of the cross-border survey (Mathä, Porpiglia, and Ziegelmeyer 2012).

⁶ Figures indicating the number of individuals and households are calculated using cross-border commuter individual and household level weights, respectively.

⁷ The sample characteristics match the characteristics published by STATEC well. STATEC (2012a) estimates the respective share of Belgian, French and German cross-border commuters from Belgium, France and Germany to be 90%, 96% and 92%.