Wealth differences across borders and the effect of real estate price dynamics: Evidence from two household surveys

Abstract

Crossing institutional or regulatory boundaries often goes together with discontinuities, be it price, wage or indeed wealth discontinuities. This paper identifies substantial wealth differences between Luxembourg resident households and cross-border commuter households. The average (median) net wealth difference is estimated to be €367,000 (€129,000) and increases for higher percentiles. Using several different regression and decomposition techniques, spatial (regional) differences in real estate price developments, and thus differences in accumulated nominal capital gains, are shown to be the main driving factor for these wealth differences. Other contributing factors are differences in age, income, education and other household characteristics.