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Immigrants, labor market dynamics and adjustment to shocks in the Euro Area

Author

Listed:
  • Gaetano Basso

    () (Bank of Italy)

  • Francesco D'Amuri

    () (Bank of Italy)

  • Giovanni Peri

    () (Univeristy of California, Davis)

Abstract

We analyze the role of labor mobility in cushioning labor demand shocks in the Euro Area. We find that foreign-born workers’ mobility is strongly cyclical, while this is not the case for natives. Foreigners’ higher population to employment elasticity reduces the variation in overall employment rates over the business cycle: thanks to foreigners, the impact of a one standard deviation change in employment on employment rates decreases by 6 per cent at country level and by 7 per cent at regional level. In addition, we compare Euro Area mobility with that of another currency union, the US. We find that the population to employment elasticity estimated for foreign-born persons is similar in the Euro Area and the US, while Euro Area natives are definitely less mobile across countries than US natives are across states in response to labor demand shocks. This latter result confirms that in the Euro Area there is room for improving country-specific shock absorption through higher labor mobility. It also suggests that immigration has helped labor market adjustments.

Suggested Citation

  • Gaetano Basso & Francesco D'Amuri & Giovanni Peri, 2018. "Immigrants, labor market dynamics and adjustment to shocks in the Euro Area," Temi di discussione (Economic working papers) 1195, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_1195_18
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    References listed on IDEAS

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    Cited by:

    1. Edoardo Di Porto & Enrica Maria Martino & Paolo Naticchioni, 2018. "Back to Black? The Impact of Regularizing Migrant Workers," CSEF Working Papers 517, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

    More about this item

    Keywords

    business cycles; international migration; mobility;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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