Migration and Imperfect Labor Markets: Theory and Cross-Country Evidence from Denmark, Germany and the UK
AbstractWe investigate the labor market effects of immigration in Denmark, Germany and the UK, three countries which are characterized by considerable differences in labor market institutions and welfare states. Institutions such as collective bargaining, minimum wages, employment protection and unemployment benefits affect the way in which wages respond to labor supply shocks, and, hence, the labor market effects of immigration. We employ a wage-setting approach which assumes that wages decline with the unemployment rate, albeit imperfectly. We find that wage flexibility is substantially higher in the UK compared to Germany and, in particular, Denmark. As a consequence, immigration has a much larger effect on the unemployment rate in Germany and Denmark, while the wage effects are larger in the UK. Moreover, the elasticity of substitution between natives and foreign workers is high in the UK and particularly low in Germany. Thus, the preexisting foreign labor force suffers more from further immigration in Germany than in the UK.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6713.
Length: 42 pages
Date of creation: Jul 2012
Date of revision:
Publication status: published in: European Economic Review, 2014, 66, 205-225
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Other versions of this item:
- Herbert Brücker & Elke Jahn & Richard Upward, 2012. "Migration and Imperfect Labor Markets: Theory and Cross-country Evidence from Denmark, Germany and the UK," Norface Discussion Paper Series 2012020, Norface Research Programme on Migration, Department of Economics, University College London.
- 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, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-EUR-2012-07-23 (Microeconomic European Issues)
- NEP-LAB-2012-07-23 (Labour Economics)
- NEP-MIG-2012-07-23 (Economics of Human Migration)
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