Based on a wage curve approach we examine the labor market effects of migration in Germany. The wage curve relies on the assumption that wages respond to a change in the unemployment rate, albeit imperfectly. This allows one to derive the wage and employment effects of migration simultaneously in a general equilibrium framework. For the empirical analysis we employ the IABS, a two percent sample of the German labor force. We find that the elasticity of the wage curve is particularly high for young workers and workers with a university degree, while it is low for older workers and workers with a vocational degree. The wage and employment effects of migration are moderate: a 1 percent increase in the German labor force through immigration increases the aggregate unemployment rate by less than 0.1 percentage points and reduces average wages by less 0.1 percent. While native workers benefit from increased wages and lower unemployment, foreign workers are adversely affected.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
3423.
Find related papers by JEL classification: F22 - International Economics - - International Factor Movements and International Business - - - International Migration J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
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