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Problem or Opportunity? Immigration, Job Search, Entrepreneurship and Labor Market Outcomes Of Natives in Germany

Author

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  • Zainab Iftikhar

  • Anna Zaharieva

Abstract

This paper evaluates the effects of low-skill immigration on small businesses, wages, and employment in Germany. We develop a search and matching model with heterogeneous workers, cross-skill matching, and endogenous entry into entrepreneurship. The model is calibrated using data from the German SocioEconomic Panel (SOEP). Quantitative analysis shows that low-skill immigration increases the welfare of high-skill workers. It also leads to the endogenous expansion of immigrant entrepreneurial activities, generating positive spillovers for all demographic groups except native entrepreneurs. However, the gains are outweighed by the losses in welfare of low-skill workers, and overall, there is a marginal loss of per-worker welfare to the economy. Policies restricting immigrant entrepreneurship relax competition for native small businesses but reduce welfare for all other worker groups.

Suggested Citation

  • Zainab Iftikhar & Anna Zaharieva, 2025. "Problem or Opportunity? Immigration, Job Search, Entrepreneurship and Labor Market Outcomes Of Natives in Germany," CRC TR 224 Discussion Paper Series crctr224_2025_714, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_714
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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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