Drivers of spatial inequalities using microsimulation
Around Luxembourg, hundreds of thousands of people live in one country and work in another. SPIN builds the first tool that shows how tax-benefit rules, jobs, commuting, and housing costs combine to shape living standards across municipalities and across borders. It then uses that tool to show policymakers where inequality is rising, where it is falling, and why.
Funded by the Luxembourg National Research Fund (FNR), CORE programme, grant C22/SC/17411636/SPIN.
Inequality is usually measured country by country. National averages can hide very different realities from one town to the next, and those local gaps feed social division and political discontent across Europe.
Luxembourg is an extreme and very informative case. It is the EU leader in cross-border commuting. More than 200,000 workers cross the border every day from France, Belgium and Germany, and they make up close to half of Luxembourg's workforce. The Greater Region works as a single labour market, but it still has several tax systems, several welfare systems, several housing markets and different costs of living.
A cross-border commuter can earn a Luxembourg salary, pay Luxembourg income tax and social contributions, receive family benefits under EU coordination rules, and pay rent and local services in France or Belgium. No existing statistical tool captures all of this at once. As a result, we know little about how cross-border work redistributes income across the region, or who gains and who loses. SPIN fills this gap.
SPIN starts from one central hypothesis: high cross-border labour mobility into Luxembourg reduces income and welfare inequalities in the surrounding regions. Commuting moves labour income from Luxembourg into neighbouring areas, and tax-benefit rules then redistribute it further. To test this, the project will:
Map income inequality and the effects of commuting. Estimate market incomes at municipality level across Luxembourg and its cross-border commuting zones, then measure how commuting redistributes income between regions and changes inequality.
Model cross-border taxes and benefits. Add cross-border tax and benefit rules to EUROMOD for the first time and assess their effects on households’ disposable incomes.
Assess the real financial value of commuting. Account for unavoidable housing and travel costs, then compare what households have left when they commute, move closer to work, or work locally. Identify the pressures shaping those choices.
In plain terms: no single dataset links income, household situation, workplace, commute and housing at the level of each municipality, and even less so across borders. SPIN builds realistic "synthetic populations" for each municipality instead. It combines survey data, census counts and administrative records, and then applies the actual tax and benefit rules of each country to calculate every household's disposable income.
For researchers:
The framework is built on the EU-SILC and EUROMOD infrastructure, so it can be transferred to other European border regions.
Disposable income inequality in Luxembourg barely moved at national level (Gini about 27.8 in 2011 and 27.9 in 2021). Taxes and benefits roughly halve inequality compared with gross income.
Almost all inequality lies within municipalities, not between them. The main challenge is not rich towns versus poor towns but very mixed populations living in the same place.
Geographic clustering of inequality weakened sharply over the last decade.
Behind the stable national figure, inequality fell in Luxembourg City and its urban belt but rose in the southern industrial belt, the north and elsewhere.
The drivers were:
Working in Luxembourg rather than in the home country raises monthly disposable income substantially, and the gain depends on household type and country of residence.
Belgian residents' gain grows with earnings because Belgium fully exempts Luxembourg income for couples. French residents' gain shrinks at higher earnings because France takes Luxembourg income into account when setting tax rates on French income for couples.
Households with children are most affected, because family benefit coordination adds to tax differences.
Standard models that treat cross-border workers as if they lived and worked in one country underestimate their disposable income. They also overstate how equal incomes are: in an illustrative simulation, the Gini for the Luxembourg workforce is underestimated. The error grows as the share of cross-border workers grows.
Explore key topics driving this project, addressing challenges like unequal income distribution with innovative solutions and research methodologies.
A passionate team of experts collaborates to deliver meaningful research and innovative solutions. Their dedication ensures this project achieves impactful outcomes.
National Stability, Local Reconfiguration: Demographics, Labour Markets, and Redistribution in Spatial Income Inequality.
IZA@LISER Discussion Paper No. 18610, April 2026
Montes-Viñas, A., Sologon, D. M. & Li, J. (2026).
Integrated Labour Markets, Fragmented Welfare Systems: Cross-Border Work and the Measurement of Disposable Income.
IZA@LISER Discussion Paper No. 18749, June 2026
Christl, M., Sologon, D. M., Montes-Viñas, A. & Wagener, R. (2026).
EUROMOD Country Report – Luxembourg 2022–2025. European Commission, JRC.
Download the report
Sologon, D. M. et al. (2026).
The EUROMOD team at the European Commission Joint Research Centre
EU project WinWin4WorkLife (grant 101132580), which co-funded DP 18749
