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Immigration and the skill premium

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Abstract

Data on EU economies show no correlation between low-skilled immigration and the skill premium. We rationalise this evidence in a model where firms face search and screening costs. Low-skilled immigration diminishes the relative benefit of screening skilled workers, leading to a decline in their relative ability within the firm and an undetermined impact on the skill premium. On region-sector and firm level data from 2008 to 2013, we find that low-skilled immigration in Italian regions has reduced skill intensity without affecting the skill premium. Using proxies for workers’ ability and screening activity, we provide supporting evidence for the theorised mechanisms.

Suggested Citation

  • Alessia Lo Turco & Daniela Maggioni & Federico Trionfetti, 2024. "Immigration and the skill premium," AMSE Working Papers 2414, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:2414
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    File URL: https://www.amse-aixmarseille.fr/sites/default/files/working_papers/wp_2024_-_nr_14_0.pdf
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    More about this item

    Keywords

    matching; screening; skill-intensity; factor relative ability;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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