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The Effects of High Skilled Immigration in a Dual Labour Market with Union Wage Setting and Fiscal Redistribution

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  • Moritz Bonn

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    (University of Siegen)

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    Abstract

    We study the effects of high skilled immigration on employment and net income in the receiving economy where the market for low skilled labour is distorted by union wage setting and a redistributive unemployment benefit scheme. Based on the empirical fact that high and low skilled workers are close albeit imperfect substitutes, we show that high skilled immigration can either be beneficial or harmful, both in terms of employment and net income. More precisely, we conclude that a Pareto improvement can be achieved if the unemployment benefit level remains unaffected by high skilled immigration whereas an overall loss in net income cannot be ruled out if we suggest unemployment benefits to be funded by an exogenous egalitarian tax rate.

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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/21-2011_bonn.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201121.

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    Length: 16pages
    Date of creation: 2011
    Date of revision:
    Publication status: Forthcoming in
    Handle: RePEc:mar:magkse:201121

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    Keywords: Immigration; Imperfect Labour Markets; Fiscal Redistribution;

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    References

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    1. Giovanni Facchini & Anna Maria Mayda, 2007. "Does the Welfare State Affect Individual Attitudes towards Immigrants? Evidence Across Countries," Economics Discussion Papers 644, University of Essex, Department of Economics.
    2. Alexander Kemnitz, 2009. "Native welfare losses from high skilled immigration," International Tax and Public Finance, Springer, vol. 16(4), pages 560-570, August.
    3. Francesc Ortega & Giovanni Peri, 2009. "The Causes and Effects of International Migrations: Evidence from OECD Countries 1980-2005," NBER Working Papers 14833, National Bureau of Economic Research, Inc.
    4. Fuest, Clemens & Thum, Marcel, 2000. "Welfare effects of immigration in a dual labor market," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 551-563, September.
    5. Giovanni Facchini & Anna Maria Mayda, 2008. "From individual attitudes towards migrants to migration policy outcomes: Theory and evidence," Economic Policy, CEPR;CES;MSH, vol. 23, pages 651-713, October.
    6. Frédéric Docquier & Çaǧlar Özden & Giovanni Peri, 2010. "The Wage Effects of Immigration and Emigration," NBER Working Papers 16646, National Bureau of Economic Research, Inc.
    7. O'Rourke, Kevin H. & Sinnott, Richard, 2006. "The determinants of individual attitudes towards immigration," European Journal of Political Economy, Elsevier, vol. 22(4), pages 838-861, December.
    8. Fuest, Clemens & Thum, Marcel, 2001. "Immigration and skill formation in unionised labour markets," European Journal of Political Economy, Elsevier, vol. 17(3), pages 557-573, September.
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