Commuters, residents and job competition in Luxembourg

Despite strong employment growth, unemployment is rising in Luxembourg. Stronger job competition from non-residents could explain this ‘unemployment paradox’. We construct a small theoretical search unemployment model of the Luxembourg labor market, with job competition between residents and cross-border commuters. We show both analytically and numerically that job competition alone cannot explain the unemployment paradox and we stress the role of the labor market institutions.

Keywords: Job competition, Commuters, Unemployment

JEL classification: J61, J64, R23