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Heterogeneous Firms and Imperfect Substitution: The Productivity Effect of Migrants

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  • Anette Haas
  • Michael Lucht

    ()
    (Institut für Arbeitsmarkt- und Berufsforschung (IAB))

Abstract

To examine the impact of migrants on the average firm productivity, wages and welfare we construct a general equilibrium model with monopolistic competition a la Melitz (2003) considering heterogeneous firms with different productivity levels and imperfect substitutability between migrants and natives. This gives rise to wage differences between natives and migrants. As a consequence firms with a higher share of migrants realize wage cost advantages. The heterogeneous distribution of migrants in our model might foster regional disparities. In the long run equilibrium it depends on the migrant share, which kind of firms survive in the market. Above a certain migrant share only those firms stay in the market which are highly productive or are able to compensate a lower productivity level by wage cost advantages. By modeling this process, we show that a higher migrant share may explain a higher average productivity in a region. Though the relative wages of natives to migrants increase in the migrant share, in contrast the welfare effects for natives are ambiguous: it might be the case that in a region with a higher migrant share the welfare of a native can be lower compared to a worker in a region of the same size with lower migrant share.

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Bibliographic Info

Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2013019.

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Date of creation: Sep 2013
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Handle: RePEc:nor:wpaper:2013019

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Keywords: immigration; firm heterogeneity; skills; tasks; regional labor markets;

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  1. George J. Borjas & Lawrence F. Katz, 2007. "The Evolution of the Mexican-Born Workforce in the United States," NBER Chapters, in: Mexican Immigration to the United States, pages 13-56 National Bureau of Economic Research, Inc.
  2. Gianmarco I.P. Ottaviano & Giovanni Peri, 2007. "The Effects of Immigration on U.S. Wages and Rents: A General Equilibrium Approach," CReAM Discussion Paper Series 0713, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  3. Herbert Brücker & Elke J. Jahn, 2011. "Migration and Wage‐setting: Reassessing the Labor Market Effects of Migration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 286-317, 06.
  4. Francesco D'Amuri & Gianmarco I. P. Ottaviano & Giovanni Peri, 2009. "The Labor Market Impact of Immigration in Western Germany in the 1990's," CReAM Discussion Paper Series 0910, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  5. Möller, Joachim & Haas, Anette, 2002. "The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997," ERSA conference papers ersa02p327, European Regional Science Association.
  6. Giovanni Peri & Chad Sparber, 2008. "Task Specialization, Immigration, and Wages," CReAM Discussion Paper Series 0802, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  7. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
  8. Ottaviano, Gianmarco Ireo Paolo & Peri, Giovanni, 2004. "Cities and Cultures," CEPR Discussion Papers 4438, C.E.P.R. Discussion Papers.
  9. David Card, 2007. "How Immigration Affects U.S. Cities," CReAM Discussion Paper Series 0711, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  10. George J. Borjas, 2003. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1335-1374, November.
  11. Martins, Pedro S. & Piracha, Matloob & Varejão, José, 2012. "Do Immigrants Displace Native Workers? Evidence from Matched Panel Data," IZA Discussion Papers 6644, Institute for the Study of Labor (IZA).
  12. Borjas, George J, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 123-50, February.
  13. Giovanni Peri, 2009. "The Effect of Immigration on Productivity: Evidence from US States," NBER Working Papers 15507, National Bureau of Economic Research, Inc.
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Cited by:
  1. Cristina Mitaritonna & Gianluca Orefice & Giovanni Peri, 2014. "Immigrants and Firms' Productivity: Evidence from France," Working Papers 2014-09, CEPII research center.

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