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Labor Market Effects of Economic Integration - The Impact of Re-Unification in German Border Regions

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  • Thiess Büttner
  • Johannes Rincke

Abstract

The paper argues that economic integration causes problems for the labor market of high-wage countries due to cross-border labor mobility and the accompanying increase in labor supply. Empirical evidence is provided from an analysis of regional labor market effects of German re-unification. In the aftermath of the re-unification shock, despite some gain in employment, border regions situated on the former German-German border are found to have experienced a fall in the relative wage position and an increase in unemployment relative to other West-German regions. As this points to adverse labor supply effects for resident workers due to cross-border labor mobility, this result is bad news for EU regions situated on the border with the Accession countries in Central and Eastern Europe.

Suggested Citation

  • Thiess Büttner & Johannes Rincke, 2004. "Labor Market Effects of Economic Integration - The Impact of Re-Unification in German Border Regions," CESifo Working Paper Series 1179, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1179
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    References listed on IDEAS

    as
    1. Angrist, Joshua D. & Krueger, Alan B., 1999. "Empirical strategies in labor economics," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 23, pages 1277-1366 Elsevier.
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    3. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    4. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
    5. Thiess Buettner & Johannes Rincke, 2007. "Labor Market Effects of Economic Integration: The Impact of Re-Unification in German Border Regions," German Economic Review, Verein für Socialpolitik, vol. 8, pages 536-560, November.
    6. Boeri, Tito & Brücker, Herbert, 2001. "Eastern Enlargement and EU-Labour-Markets: Perceptions, Challenges and Opportunities," IZA Discussion Papers 256, Institute for the Study of Labor (IZA).
    7. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
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    12. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
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    More about this item

    Keywords

    economic integration; border regions; EU enlargement; German re-unification; differences in differences estimation;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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