The EU integration process has a significant impact on labor markets in EU Member States as cross-border employment regulations are being liberalized and mobility among workers increases. This process is not confined to full members of the EU as similarly liberalizing agreements have been reached with neighboring countries like Norway, Iceland, or Switzerland, which opted to link their economy closer to EU markets. A growing literature analyzes how such developments affect economic outcomes or population attitudes towards migration. However, we know surprisingly little about whether expected and experienced consequences of these liberalization efforts result in policy adjustments or compensatory measures to redistribute reform rents between beneficiaries and potentially disadvantaged groups.  

Against this backdrop, this project investigates the response in tax policies by Swiss border region municipalities to a strong and exogenous increase in foreign labor supply. The analysis thereby sheds light on more indirect effects of labor market integration by tracking adjustments in local policy, which equally affect the overall impact of the labor market reform under investigation.