The Asymmetric Unemployment Response of Natives and Foreigners to Migration Shocks

This paper provides new evidence on the macroeconomic effects of net migration shocks in Germany. Using monthly data from 2006 to 2019 and a variety of identification strategies in a structural vector autoregressive model, we show that migration shocks are expansionary. Net migration increases persistently industrial production, per capita net exports and tax revenue. In the labor market, migra- tion boosts persistently job openings and, after a year and a half, hourly wages in manufacturing. Total unemployment declines but the response is asymmetric be- tween natives and foreigners. Unemployment falls persistently for natives while it rises a year after the shock for foreigners as the newly settled migrants enter the labor market gradually. Using also quarterly data in a mixed-frequency SVAR, we shed light on the employment and participation responses for natives and foreign- ers. We also show that migration shocks increase per capita GDP, investment, and hourly wages of the aggregate economy. Taken together, our results highlight a job-creation effect for natives and a job-competition effect for foreigners.