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Welfare Effects of Immigration in a Dual Labor Market

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  • Clemens Fuest
  • Marcel Thum

Abstract

The paper analyses the welfare effects of immigration when some sectors of the economy are characterized by wage bargaining between unions and employers. We show that immigration is unambiguously beneficial if the wage elasticity of labor demand in the competitive sectors is smaller than in the unionised sectors. In the opposite case, the welfare effect of immigrat ion is ambiguous; little immigration then reduces the native population's welfare, whereas large scale immigration tends to enhance welfare.

Suggested Citation

  • Clemens Fuest & Marcel Thum, 1999. "Welfare Effects of Immigration in a Dual Labor Market," CESifo Working Paper Series 215, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_215
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp215.pdf
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    References listed on IDEAS

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    1. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
    2. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398, November.
    3. Schmidt, Christoph M. & Stilz, Anette & Zimmermann, Klaus F., 1994. "Mass migration, unions, and government intervention," Journal of Public Economics, Elsevier, vol. 55(2), pages 185-201, October.
    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. Berry, R Albert & Soligo, Ronald, 1969. "Some Welfare Aspects of International Migration," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 778-794, Sept./Oct.
    6. Fuest, Clemens & Thum, Marcel, 2001. "Immigration and skill formation in unionised labour markets," European Journal of Political Economy, Elsevier, vol. 17(3), pages 557-573, September.
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    Cited by:

    1. Fuest, Clemens & Thum, Marcel, 2001. "Immigration and skill formation in unionised labour markets," European Journal of Political Economy, Elsevier, vol. 17(3), pages 557-573, September.
    2. 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 - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Kemnitz, Alexander, 2008. "Can immigrant employment alleviate the demographic burden? The role of union centralization," Economics Letters, Elsevier, pages 123-126.
    4. Laixun Zhao & Kenji Kondoh, 2007. "Temporary and Permanent Immigration under Unionization," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 346-358, May.
    5. 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).
    6. Clemens Fuest & Marcel Thum, 2001. "Zuwanderungsgewinne bei unvollständigen Arbeitsmärkten?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 54(08), pages 28-31, May.
    7. König, Jan & Skupnik, Christoph, 2012. "Labor market integration of migrants: Hidden costs and benefits in two-tier welfare states," Discussion Papers 2012/5, Free University Berlin, School of Business & Economics.
    8. Möller, Joachim, 2001. "Regional adjustment dynamics," HWWA Discussion Papers 146, Hamburg Institute of International Economics (HWWA).
    9. Paweł Kaczmarczyk, 2013. "Are immigrants a burden for the state budget? Review paper," RSCAS Working Papers 2013/79, European University Institute.
    10. 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.
    11. Kemnitz, Alexander, 2003. "Unemployment, Technology and the Welfare Effects of Immigration," Discussion Papers 611, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    12. 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.
    13. Chletsos, Michael & Roupakias, Stelios, 2012. "Immigration, Unemployment and Growth: Empirical Evidence from Greece," MPRA Paper 39861, University Library of Munich, Germany.
    14. Jean J. Gabszewicz & Skerdilajda Zanaj, 2014. "Migration: a burden or a blessing for natives?," CREA Discussion Paper Series 14-01, Center for Research in Economic Analysis, University of Luxembourg.
    15. Kaczmarczyk, Pawel, 2015. "Burden or Relief? Fiscal Impacts of Recent Ukrainian Migration to Poland," IZA Discussion Papers 8779, Institute for the Study of Labor (IZA).
    16. Vikhrov Dmytro, 2013. "Welfare Effects of Labor Migration," CERGE-EI Working Papers wp491, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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    Keywords

    Immigration policy; trade unions; welfare;

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