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Immigration and Skill Formation in Unionised Labour Markets

  • Clemens Fuest
  • Marcel Thum

This paper analyses the impact of immigration on the welfare of the native population in an economy that consists of skilled and unskilled workers. Due to unionisation, the wage rate in the market for unskilled labour is above the competitive level. For a given skill endowment of the native population, we show that immigration reduces the welfare of the host country up to a certain threshold and then increases it with further immigration. For the case of endogenous skill formation, an increase in expected immigration raises the number of skilled individuals in the native population. If the government can credibly commit itself to a certain immigration policy, skill formation of the native population will adjust, so that immigration maybe strictly welfare increasing.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-1999/cesifo_wp214.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 214.

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Date of creation: 1999
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Handle: RePEc:ces:ceswps:_214
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  17. Clemens Fuest & Marcel Thum, 1999. "Welfare Effects of Immigration in a Dual Labor Market," CESifo Working Paper Series 215, CESifo Group Munich.
  18. Richard Layard & Stephen Nickell, 1990. "Is Unemployment Lower if Unions Bargain over Employment?," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 773-787.
  19. Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April.
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