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The European refugee crisis and the natural rate of output

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  • Katja Heinisch
  • Klaus Wohlrabe

Abstract

The European Commission follows a harmonized approach for calculating structural (potential) output for EU member states that takes into account labour as an important ingredient. This article shows how the recent huge migrants’ inflow to Europe affects trend output. Due to the fact that the immigrants immediately increase the working population but effectively do not enter the labour market, we illustrate that the potential output is potentially upward biased without any corrections. Taking Germany as an example, we find that the average medium-term potential growth rate is lower if the migration flow is modelled adequately compared to results based on the unadjusted European Commission procedure.

Suggested Citation

  • Katja Heinisch & Klaus Wohlrabe, 2017. "The European refugee crisis and the natural rate of output," Applied Economics Letters, Taylor & Francis Journals, vol. 24(16), pages 1138-1142, September.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:16:p:1138-1142
    DOI: 10.1080/13504851.2016.1259741
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    1. Herbert Brücker & Elke J. Jahn, 2011. "Migration and Wage‐setting: Reassessing the Labor Market Effects of Migration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(2), pages 286-317, June.
    2. Karel Havik & Kieran Mc Morrow & Fabrice Orlandi & Christophe Planas & Rafal Raciborski & Werner Roeger & Alessandro Rossi & Anna Thum-Thysen & Valerie Vandermeulen, 2014. "The Production Function Methodology for Calculating Potential Growth Rates & Output Gaps," European Economy - Economic Papers 2008 - 2015 535, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Francesca D'Auria & Cécile Denis & Karel Havik & Kieran Mc Morrow & Christophe Planas & Rafal Raciborski & Werner Roger & Alessandro Rossi, 2010. "The production function methodology for calculating potential growth rates and output gaps," European Economy - Economic Papers 2008 - 2015 420, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Projektgruppe Gemeinschaftsdiagnose, 2016. "Gemeinschaftsdiagnose Frühjahr 2016: Aufschwung bleibt moderat – Wirtschaftspolitik wenig wachstumsorientiert," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 22(2), pages 25-25.
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    Cited by:

    1. Timo Wollmershäuser & Wolfgang Nierhaus & Nikolay Hristov & Dorine Boumans & Johanna Garnitz & Marcell Göttert & Christian Grimme & Stefan Lauterbacher & Robert Lehmann & Wolfgang Meister & Magnus Rei, 2016. "Ifo Economic Forecast 2016–2018: Germany’s Robust Economy Faces a Year of Uncertain International Economic Policy," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(24), pages 28-73, December.
    2. Breuer Sebastian & Elstner Steffen, 2020. "Germany’s Growth Prospects against the Backdrop of Demographic Change," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(5), pages 565-605, October.
    3. Timo Wollmershäuser & Marcell Göttert & Christian Grimme & Carla Krolage & Stefan Lautenbacher & Robert Lehmann & Sebastian Link & Wolfgang Nierhaus & Ann-Christin Rathje & Magnus Reif & Radek Šauer &, 2018. "ifo Economic Forecast Winter 2018: Germany’s Economy Cools Down," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(24), pages 28-82, December.
    4. Timo Wollmershäuser & Wolfgang Nierhaus & Nikolay Hristov & Dorine Boumans & Marcell Göttert & Christian Grimme & S. Lauterbacher & Robert Lehmann & Wolfgang Meister & Andreas Peichl & Magnus Reif & F, 2017. "ifo Economic Forecast 2017/2018: Germany’s Economy Is Strong and Stable," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(12), pages 30-83, June.
    5. Timo Wollmershäuser & Marcell Göttert & Christian Grimme & Carla Krolage & Stefan Lautenbacher & Robert Lehmann & Sebastian Link & Wolfgang Nierhaus & Ann-Christin Rathje & Magnus Reif & Anna-Pauliina, 2019. "ifo Konjunkturprognose Sommer 2019: Deutsche Konjunktur ohne Schwung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(12), pages 25-78, June.
    6. Timo Wollmershäuser & Silvia Delrio & Marcell Göttert & Christian Grimme & Jochen Güntner & Carla Krolage & Stefan Lautenbacher & Robert Lehmann & Sebastian Link & Wolfgang Nierhaus & Magnus Reif & Ra, 2018. "ifo Economic Forecast Summer 2018: Storm Clouds Gather over German Economy," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(12), pages 33-87, June.
    7. Breuer, Sebastian & Elstner, Steffen, 2017. "Die Wachstumsperspektiven der deutschen Wirtschaft vor dem Hintergrund des demografischen Wandels: Die Mittelfristprojektion des Sachverständigenrates," Working Papers 07/2017, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    8. Timo Wollmershäuser & Silvia Delrio & Clemens Fuest & Marcell Göttert & Christian Grimme & Carla Krolage & Stefan Lautenbacher & Robert Lehmann & Wolfgang Nierhaus & Andreas Peichl & Magnus Reif & Rad, 2017. "ifo Economic Forecast 2017–2019: German Economy on Track to Boom," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(24), pages 28-81, December.
    9. Timo Wollmershäuser & Florian Eckert & Marcell Göttert & Christian Grimme & Carla Krolage & Stefan Lautenbacher & Robert Lehmann & Sebastian Link & Heiner Mikosch & Stefan Neuwirth & Wolfgang Nierhaus, 2019. "ifo Konjunkturprognose Winter 2019: Deutsche Konjunktur stabilisiert sich," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(24), pages 27-89, December.

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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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