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How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany

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  • Braun, Sebastian Till
  • Weber, Henning

Abstract

This paper provides a comprehensive analysis of the dynamic labor market effects of one of the largest forced population movements in history, the mass inflow of eight million German expellees into West Germany after World War II. The expellee inflow was distributed very asymmetrically across two West German regions. We develop a dynamic equilibrium model that closely fits two decades of historical data on the regional unemployment differential and the regional migration rate. Both variables increase dramatically after the expellee inflow and decline only gradually over the next decade. The long-lasting adjustment process implies losses in the lifetime labor income of native workers that are not covered by conventional steady state analyses. Regional migration serves as an important adjustment margin for native workers to insure against local labor supply shocks.

Suggested Citation

  • Braun, Sebastian Till & Weber, Henning, 2021. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Journal of International Economics, Elsevier, vol. 129(C).
  • Handle: RePEc:eee:inecon:v:129:y:2021:i:c:s0022199620301318
    DOI: 10.1016/j.jinteco.2020.103416
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    1. Lara Bohnet & Susana Peralta & João Pereira dos Santos, 2022. "Cousins from Overseas: The Labour Market Impact of a Major Forced Return Migration Shock," CESifo Working Paper Series 9971, CESifo.
    2. Stähler, Nikolai, 2017. "A model-based analysis of the macroeconomic impact of the refugee migration to Germany," Discussion Papers 05/2017, Deutsche Bundesbank.
    3. Kilian Huber, 2021. "Are Bigger Banks Better? Firm-Level Evidence from Germany," Journal of Political Economy, University of Chicago Press, vol. 129(7), pages 2023-2066.
    4. Hart, Janine & Clemens, Marius, 2019. "A search and matching approach to business-cycle migration in the euro area," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203659, Verein für Socialpolitik / German Economic Association.
    5. Stuhler, Jan & Jaeger, David & Ruist, Joakim, 2018. "Shift-Share Instruments and the Impact of Immigration," CEPR Discussion Papers 12701, C.E.P.R. Discussion Papers.
    6. Francesco Furlanetto & Orjan Robstad, 2019. "Immigration and the macroeconomy: some new empirical evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 1-19, October.
    7. Lozej, Matija, 2019. "Economic migration and business cycles in a small open economy with matching frictions," Economic Modelling, Elsevier, vol. 81(C), pages 604-620.
    8. Braun, Sebastian Till & Kramer, Anica & Kvasnicka, Michael, 2017. "Local Labor Markets and the Persistence of Population Shocks," IZA Discussion Papers 11077, Institute of Labor Economics (IZA).
    9. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    10. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," CESifo Working Paper Series 6595, CESifo.
    11. Braun, Sebastian & Dwenger, Nadja, 2017. "The local environment shapes refugee integration: Evidence from post-war Germany," Hohenheim Discussion Papers in Business, Economics and Social Sciences 10-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    12. Michael Wyrwich, 2020. "Migration restrictions and long-term regional development: evidence from large-scale expulsions of Germans after World War II [The consequences of radical reform: the French revolution]," Journal of Economic Geography, Oxford University Press, vol. 20(2), pages 481-507.
    13. Bandeira, Guilherme & Caballé, Jordi & Vella, Eugenia, 2022. "Emigration and fiscal austerity in a depression," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    14. Francesco Furlanetto & Orjan Robstad, 2019. "Immigration and the macroeconomy: some new empirical evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 1-19, October.
    15. Stöhr, Tobias & Wichardt, Philipp C., 2016. "Openness to Concerns of Host Country Population Improves Attitudes Towards Immigrants," VfS Annual Conference 2016 (Augsburg): Demographic Change 145574, Verein für Socialpolitik / German Economic Association.
    16. Lara Bohnet & Susana Peralta & Joao Pereira dos Santos, 2021. "Cousins from overseas: the labour market impact of half a million Portuguese repatriates," NOVAFRICA Working Paper Series wp2114, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
    17. Ikhenaode, Bright Isaac & Parello, Carmelo Pierpaolo, 2020. "Immigration and remittances in a two-country model of growth with labor market frictions," Economic Modelling, Elsevier, vol. 93(C), pages 675-692.
    18. Braun, Sebastian T. & Dwenger, Nadja, 2020. "Settlement location shapes the integration of forced migrants: Evidence from post-war Germany⁎," Explorations in Economic History, Elsevier, vol. 77(C).
    19. Braun, Sebastian Till & Kramer, Anica & Kvasnicka, Michael, 2017. "Local Labor Markets and the Persistence of Population Shocks," IZA Discussion Papers 11077, Institute of Labor Economics (IZA).

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    14. Stefano Fusaro & Enrique López‐Bazo, 2021. "Immigration and Native Employment. Evidence from Italian Provinces in the Aftermath of the Great Recession," Papers in Regional Science, Wiley Blackwell, vol. 100(2), pages 405-428, April.
    15. Cem Özgüzel, 2021. "The Cushioning Effect of Immigrant Mobility," CESifo Working Paper Series 9268, CESifo.
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    More about this item

    Keywords

    Immigration; Labor market adjustments; Dynamic search and matching model of unemployment; Asymmetric labor supply shock; Post-war Germany;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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