The Abolition of Immigration Restrictions and the Performance of Firms and Workers: Evidence from Switzerland

We study a reform that granted European cross-border workers free access to the Swiss labor market. Our Differences-in-Differences estimations leverage the fact that regions close to the border were affected more intensely and earlier. The greater availability of cross-border workers increased their employment but also wages and possibly employment of highly educated native workers although the new cross-border workers were also highly educated. The reason is a simultaneous increase in labor demand in skill-intensive firms: the reform increased the size, productivity, innovation performance of some incumbent firms, attracted new firms, and created opportunities for natives to pursue managerial jobs.