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 Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2012020.
Date of creation: Jul 2012
Date of revision:
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immigration; unemployment; wages; labor markets; panel data; comparative studies.;
Other versions of this item:
- Brücker, Herbert & Jahn, Elke J. & Upward, Richard, 2012. "Migration and Imperfect Labor Markets: Theory and Cross-Country Evidence from Denmark, Germany and the UK," IZA Discussion Papers 6713, Institute for the Study of Labor (IZA).
- 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-2012-07-14 (All new papers)
- NEP-EEC-2012-07-14 (European Economics)
- NEP-EUR-2012-07-14 (Microeconomic European Issues)
- NEP-LAB-2012-07-14 (Labour Economics)
- NEP-MIG-2012-07-14 (Economics of Human Migration)
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