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Protective or Counter-Productive? European Labour Market Institutions and the Effect of Immigrants on EU Natives

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  • Angrist, Joshua
  • Kugler, Adriana D.

Abstract

We estimate the effect of immigrant flows on native employment in Western Europe, and then ask whether the employment consequences of immigration vary with institutions that affect labour market flexibility. Reduced flexibility may protect natives from immigrant competition in the near term, but our theoretical framework suggests that reduced flexibility is likely to increase the negative impact of immigration on equilibrium employment. In models without interactions, OLS estimates for a panel of European countries in the 1980s and 1990s show small, mostly negative immigration effects. To reduce bias from the possible endogeneity of immigration flows, we use the fact that many immigrants arriving after 1991 were refugees from the Balkan wars. An IV strategy based on variation in the number of immigrants from former Yugoslavia generates larger though mostly insignificant negative estimates. We then estimate models allowing interactions between the employment response to immigration and institutional characteristics including business entry costs. These results, limited to the sample of native men, generally suggest that reduced flexibility increases the negative impact of immigration. Many of the estimated interaction terms are significant, and imply a significant negative effect on employment in countries with restrictive institutions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3196.

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Date of creation: Feb 2002
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Handle: RePEc:cpr:ceprdp:3196

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Keywords: entry costs; european unemployment; immigrant absorption; labour market flexibility;

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  1. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Working papers 98-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
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  21. repec:fth:inseep:2001-12 is not listed on IDEAS
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Citations

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Cited by:
  1. Sascha O. Becker & Andrea Ichino & Giovanni Peri, 2003. "How Large is the "Brain Drain" from Italy?," CESifo Working Paper Series 839, CESifo Group Munich.
  2. Speciale, Biagio, 2012. "Does immigration affect public education expenditures? Quasi-experimental evidence," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 773-783.
  3. Alho, Kari E., 2002. "Labour Markets and Immigration Connected to Enlargement," Discussion Papers 791, The Research Institute of the Finnish Economy.
  4. Schündeln, Matthias, 2007. "Are Immigrants More Mobile Than Natives? Evidence from Germany," IZA Discussion Papers 3226, Institute for the Study of Labor (IZA).

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