Floorspace price discontinuities and taxation in cross-border commuting areas

Cross-border housing markets have become more prevalent in Europe since the establishment of the European Union. Using data from the functional urban area of Luxembourg, we document significant floorspace price discontinuities at the borders of Luxembourg with Belgium, France, and Germany. Employing a quantitative spatial urban model and spatial regression discontinuity techniques, we show that differences in tax rates and tax importation account for 9% and 17% of the observed price jump, respectively. The remaining price discrepancy is explained by differences in productivity and amenities.