Cross-border shopping: evidence from household transaction records.

Abstract

Cross-border shopping expands product variety and lowers prices for consumers in high-price countries, but it diminishes domestic tax revenues, reduces sales, and shifts demand away from local retailers. Exploiting Switzerland's COVID-19-induced border closure as a natural experiment, I investigate the socioeconomic implications of cross-border shopping. Linking detailed grocery transaction records for 710,000 households to administrative data, I find that the border closure raises domestic grocery expenditures in border areas by an additional 10.4%. The benefits of cross-border shopping, however, are heterogeneous, and larger and lower-income households exhibit a particularly strong propensity to shop abroad. Based on these patterns, I estimate an annual loss of 1.5 billion Swiss francs in domestic grocery sales, equivalent to 3.8% of the total market.