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Immigration and Skill Formation in Unionised Labour Markets

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  • Clemens Fuest
  • Marcel Thum

Abstract

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.

Suggested Citation

  • Clemens Fuest & Marcel Thum, 1999. "Immigration and Skill Formation in Unionised Labour Markets," CESifo Working Paper Series 214, CESifo.
    • Handle: RePEc:ces:ceswps:_214
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    Cited by:

    1. Moritz Bonn, 2011. "High Skilled Immigration Policy and Union Wage Setting," Volkswirtschaftliche Diskussionsbeiträge 147-11, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 27 Aug 2012.
    2. Barbier-Gauchard, Amélie & De Palma, Francesco & Diana, Giuseppe, 2014. "Why should Southern economies stay in the Euro Zone? The role of labor markets," Economic Modelling, Elsevier, vol. 43(C), pages 201-208.
    3. Gil S. Epstein, 2013. "Frontier issues of the political economy of migration," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 22, pages 411-431, Edward Elgar Publishing.
    4. Puhani, Patrick A. & Frölich, Markus, 2002. "Immigration and Heterogeneous Labor in Western Germany: A Labor Market Classification Based on Nonparametric Estimation," ZEW Discussion Papers 02-01, ZEW - Leibniz Centre for European Economic Research.
    5. Thomas Moutos & William Scarth, 2002. "Technical Change and Unemployment: Policy Responses and Distributional Considerations," CESifo Working Paper Series 710, CESifo.
    6. Dai, Tiantian & Liu, Xiangbo & Xie, Biancen, 2013. "The impact of immigrants on host country crime," Economics Letters, Elsevier, vol. 119(2), pages 157-161.
    7. Fuest, Clemens & Thum, Marcel, 2000. "Welfare effects of immigration in a dual labor market," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 551-563, September.
    8. Yuji Tamura, 2006. "Disagreement over the immigration of low-income earners in a welfare state," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 691-702, October.
    9. Schirwitz, Beate & Dittrich, Marcus, 2006. "A Dynamic Model of Union Behaviour. The Role of an Endogenous Outside Option and Bargaining Centralisation," Dresden Discussion Paper Series in Economics 07/06, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    10. Tamura, Yuji, 2004. "Referendum-Led Immigration Policy In The Welfare State," The Warwick Economics Research Paper Series (TWERPS) 713, University of Warwick, Department of Economics.
    11. Alexander Kemnitz, 2006. "Immigration as a commitment device," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 299-313, June.
    12. Laixun Zhao & Kenji Kondoh, 2007. "Temporary and Permanent Immigration under Unionization," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 346-358, May.
    13. Epstein, Gil S. & Hillman, Arye L., 2003. "Unemployed immigrants and voter sentiment in the welfare state," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1641-1655, August.
    14. Moritz Bonn, 2011. "The Effects of High Skilled Immigration in a Dual Labour Market with Union Wage Setting and Fiscal Redistribution," MAGKS Papers on Economics 201121, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    15. Clemens Fuest & Marcel Thum, 2001. "Gains from migration in imperfect labour markets?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 54(08), pages 28-31, May.
    16. Wido Geis, 2009. "Does Educational Choice Erode the Immigration Surplus?," ifo Working Paper Series 80, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    17. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    18. Wang, Jun & Liao, Chengjuan & Wan, Xuan & Song, Hui, 2021. "Skill Formation, Employment Discrimination, and Wage Inequality: Evidence from the People’s Republic of China," ADBI Working Papers 1283, Asian Development Bank Institute.
    19. Giorgio Bellettini & Carlotta Berti Ceroni, 2005. "When the Union Hurts the Workers: A Positive Analysis of Immigration Policy," CESifo Working Paper Series 1421, CESifo.
    20. Alessandra Venturini & Gil S. Epstein, 2006. "Migration, effort, and voter sentiment towards temporary migration," CHILD Working Papers wp18_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    21. Theodore Palivos & Chong Yip, 2010. "Illegal immigration in a heterogeneous labor market," Journal of Economics, Springer, vol. 101(1), pages 21-47, September.
    22. Lumpe, Christian & Weigert, Benjamin, 2010. "Immigration, education and native wage inequality," Working Papers 01/2010, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    23. Christian Lumpe & Benjamin Weigert, 2009. "Immigration Policy, Equilibrium Unemployment, and Underinvestment in Human Capital," LABOUR, CEIS, vol. 23(1), pages 97-130, March.

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