Cross-border shopping: evidence from household transaction records

Area of Science:

• Economics
• Consumer Behavior
• Public Policy

Background:

• Cross-border shopping presents a complex economic dynamic, offering consumers wider choices and lower prices while potentially impacting domestic markets.
• High-price countries often experience significant cross-border shopping, leading to reduced domestic tax revenues and sales for local retailers.

Purpose of the Study:

• To investigate the socioeconomic implications of cross-border shopping using a natural experiment.
• To quantify the impact of reduced cross-border shopping on domestic grocery expenditures and sales.

Main Methods:

• Utilizing Switzerland's COVID-19 border closure as a natural experiment.
• Linking detailed grocery transaction data from 710,000 households with administrative data.
• Analyzing changes in domestic grocery expenditures in border regions before and during the closure.

Main Results:

• The border closure led to a 10.4% increase in domestic grocery expenditures in border areas.
• Cross-border shopping benefits are heterogeneous, with larger and lower-income households showing a stronger propensity to shop abroad.
• An estimated annual loss of 1.5 billion Swiss francs (3.8% of the market) in domestic grocery sales was observed.

Conclusions:

• Cross-border shopping significantly impacts domestic markets, with varying effects across different household demographics.
• Policies addressing cross-border shopping need to consider its heterogeneous benefits and socioeconomic consequences.
• The study highlights the substantial economic shifts attributable to cross-border consumer behavior.