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Wage and employment effects of immigration to Germany: an analysis based on local labor markets

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  • Pischke, Jörn-Steffen
  • Velling, Johannes

Abstract

We analyze the impact of increased immigration on labor market outcomes of natives in Germany using a dataset of county level variables for the late 1908s. In order to construct more unified labor market regions we aggregate the 328 counties to 167 larger regions. We study two measures of immigration, the change in the share of foreigners between 1985 and 1989 as well as one year gross and net flows of immigrants to an area. In order to address the potential problem of immigrant selection into local labor markets with superior performance we instrument the change in the foreign share by its previous level. Especially for unemployment we find large effects of an increased foreign share. We conjecture that these results might be spurious. Foreigners tend to be concentrated in lower unemployment areas but unemployment tends to be mean reverting during the boom period we study. This leads to a positive correlation between the instrument and the change in unemployment. Taking account of the mean reversion in unemployment we find no detrimental effect of immigration. Similar results are obtained on the basis of one year flow data of foreigners. We also find no support for the hypothesis that the absence of displacement effects are due to a response of native migration patterns. The initial settlement of immigrants in Germany is largely independent of labor market conditions. Subsequent internal moves by foreigners are more responsive to local unemployment albeit much less than internal migration of natives. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 94-03.

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Date of creation: 1994
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Handle: RePEc:zbw:zewdip:9403

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  1. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, May.
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Cited by:
  1. Sari Pekkala Kerr & William R. Kerr, 2011. "Economic Impacts of Immigration: A Survey," NBER Working Papers 16736, National Bureau of Economic Research, Inc.
  2. Thomas Bauer, 1998. "Do Immigrants Reduce Natives' Wages? Evidence from Germany," Departmental Working Papers 199802, Rutgers University, Department of Economics.
  3. Zweimuller, Josef & Winter-Ebmer, Rudolf, 1995. "Internal labor markets and firm-specific determination of earnings in the presence of immigrant workers," Economics Letters, Elsevier, vol. 48(2), pages 185-191, May.
  4. Antje Mertens & Anette Haas, 2005. "Regional Unemployment and Job Switches in Germany – An Analysis at District Level," ERSA conference papers ersa05p592, European Regional Science Association.
  5. Velling, Johannes, 1995. "Die Arbeitserlaubnis als Instrument der Arbeitsmarktpolitik zur Steuerung internationaler Zuwanderung auf den Arbeitsmarkt," ZEW Discussion Papers 95-16, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Kalckreuth, Ulf von, 2000. "Ethnic Dualism and Communication Costs – Explaining Segmentation and Wage Inertia," Discussion Papers 593, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.

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