Cross-border Posting of Workers: Effects on Firms and Workers in Austria

European labor market integration hinges on the free movement of people via migration, but also to a considerable extent on the free movement of services via posting of workers. However, evidence on the effects of posted workers is scarce. This project proposes to study the impact of posted workers on firms and workers in Austria. We link novel register data on cross-border posting of workers with firm- and worker-level administrative data available via the Austrian Micro Data Center. Utilizing this novel data source, we are able to map the evolution of posted workers’ employment in Austria and to document the characteristics of the firms and workers involved. Further, we combine two identification strategies to estimate causal effects of posting workers on firms and workers. We exploit the inflow of posted workers after the liberalization of service trade with the new Eastern European member states, as well as differential timing in the use of posted services by firms. First, we study the impact on receiving firms, tracking their revenues, profits as well as their labor share. Second, we assess worker-level effects, such as employment and wages, (re-)training and sectoral switches. This project will generate the first causal evidence on how posted workers affect receiving firms, linking firm-level responses to worker-level effects. It thus fills important gaps in understanding the consequences of policies that liberalize labor mobility.