Study of the link between cross-border mobility, housing market development and spatial inequality in the Greater Region (CRHOUSINQ)

Fueled by a thriving finance and banking sector, as well as multinational start-ups, Luxembourg has experienced a remarkable increase in real GDP of approximately 60% since 2007, surpassing the growth rates of neighbouring countries, which stood at around 35%. This growth has been made possible by significant inflows of immigrants and daily cross-border commuters, but it has also led to spatial development disparities within the Greater Region. However, it is important to recognise that Luxembourg's prosperity cannot be taken for granted, considering its limited demographic absorption capacity and the dynamics of its housing market. The magnitude of future growth potential and the macroeconomic outlook for the coming decades remain uncertain.

In CRHOUSINQ, our aim is to examine the sustainability of Luxembourg's growth miracle and analyse the underlying trends in spatial inequalities. We seek to shed light on the intricate connections between labour mobility, spatial concentration of economic activity, and core-periphery inequalities in the Greater Region.

Over the past 25 years, the resident population of Luxembourg has grown by approximately 60% due to significant inflows of migrants. During the same period, the number of cross-border commuters has increased fourfold, accounting for over 40% of the total workforce. This concentration of population and economic activity has resulted in a rise in land prices and real estate properties in both the core economy and its immediate vicinity. This has made property acquisition prohibitively expensive for many individuals while increasing the real wealth of real estate owners. Therefore, our focus on cross-border labour inflows and housing market developments is crucial for addressing questions of sustainability and inclusiveness.

The project is divided into three work packages. The first package examines the factors influencing commuting and residential migration decisions. The second package investigates the macroeconomic effects and distributional impacts of international labour inflows. Lastly, the third package aims to model the relationships between growth, labour mobility, and the housing market within a multi-region general equilibrium framework.

Looking ahead, our approach will be utilised to quantify the effects of various developments and policy reforms, such as national research priorities in digital technologies, the increasing demand for highly skilled workers, the growing reliance on teleworking practices, and investments in housing supply, including commercial buildings, new houses, apartments, and affordable housing.

CRHOUSING involves Vincent Dautel, Frédéric Docquier, Antoine Paccoud, Silvia Peracchi and Alexander Yarkin. In addition, the project team collaborates with three external partners: Giovanni Peri from the University of California at Davis, Michel Bierlaire from Ecole Polytechnique de Lausanne, and Michel Beine from the University of Luxembourg.