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Migration, Trade and Unemployment

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  • Benedikt Heid
  • Mario Larch

Abstract

A source of anxiety of policy makers and the public in general is the detrimental impact of globalization and immigration on unemployment. The transitory restrictions for worker migration after the EU enlargements of 2004 and 2007 exemplify the supposed negative effect of immigration on labor markets. This paper aims to identify the effects of immigration alongside trade on unemployment taking into account the substitutability of worker and goods flows. We use data from 24 OECD countries over the period from 1997 to 2007 and employ instrumental variables fixed effects and dynamic panel estimators in order to account for unobserved heterogeneity as well as the potential endogeneity of migration flows and the high persistence of unemployment. We find a significant negative effect of immigration on unemployment on average.

Suggested Citation

  • Benedikt Heid & Mario Larch, 2011. "Migration, Trade and Unemployment," ifo Working Paper Series 115, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_115
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    References listed on IDEAS

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    Cited by:

    1. Hans-Georg Petersen & Alexander Martin Wiegelmann, 2013. "Risk Taking, Principal Agent Problems And Breakdown Of Corporate Social Responsibility (Csr): How To Reestablish Safe-Assets And Capital Funding For Social Security?," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 8(2), pages 7-30, June.
    2. Alamá-Sabater, Luisa & Heid, Benedikt & Jiménez-Fernández, Eduardo & Márquez-Ramos, Laura, 2016. "What drives interdependence of FDI among host countries? The role of geographic proximity and similarity in public debt," Economic Modelling, Elsevier, vol. 58(C), pages 466-474.
    3. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    4. Heid, Benedikt, 2014. "Preferential Trade Agreements, Unemployment, and the Informal Sector," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100376, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Migration; unemployment; international trade; fixed effects instrumental variable panel estimators; dynamic panel estimators;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • F15 - International Economics - - Trade - - - Economic Integration

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