Mathilde Muñoz - Research

Abstract: This paper studies how improved access to high-paying foreign labor markets shapes local economic trajectories, long-run demographic patterns, and political preferences in sending regions. We study this question in the context of the French North-East region, known as country's former industrial heartland. We exploit a large and sudden rise in cross-border employment opportunities at the France-Luxembourg border, triggered by EU-wide financial liberalization in the mid-1980s and facilitated by the opening of a new highway linking Northern France to Luxembourg City. Combining this time-varying foreign labor demand shock with fine-grained spatial differentials in commuting access within the region, we document three main findings. First, municipalities closer to Luxembourg experienced a sharp and persistent increase in cross-border commuting, with more than one-third of prime-age workers employed abroad by the end of the period. Second, these commuting responses translated into sizable long-run gains in local employment, incomes, and population, driven by positive net migration flows, alongside adjustments in the local housing stock. Third, exposure to dynamic foreign labor markets led to a significant decline in far-right support in treated municipalities, tempering the rise of Euroscepticism and anti-globalization sentiments visible elsewhere in France's rust belt. Together, the results show that international labor-market integration can operate not only as a source of economic disruption but also as a stabilizing force for places able to access expanding foreign labor demand, including within regions facing structural decline.

Tax Discrimination: Competition in the Market for Firms (joint with Cailin Slattery)