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High Unemployment in Germany: Why do Foreigners Suffer Most?

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  • Wido Geis

Abstract

In Germany, immigrant unemployment is not only higher than native unemployment; it also reacts more to changes in the situation on the labor market. Decomposing the gap between native and immigrant unemployment into a baseline and a labor-market situation component, I find that the unemployment rate of immigrants would lie at 5.6 percentage points for zero native unemployment (the baseline component of the gap). An increase in overall unemployment by 1 percentage point leads to a 0.7 percentage points higher increase in immigrant unemployment than in native unemployment (the situation component). The large part of this difference, about 3/4 of the baseline and 4/5 of the situation component, can be explained by differences in the endowments with classical human capital (educational degrees and experience) between immigrants and natives. Also controlling for country-specific human capital, particularly language skills, the situation component becomes insignificant and the baseline effect again decreases by 1/2. Adding controls for social networks, the baseline effect also becomes insignificant. Thus, human capital and social networks can possibly fully explain the difference between native and immigrant unemployment in Germany.

Suggested Citation

  • Wido Geis, 2010. "High Unemployment in Germany: Why do Foreigners Suffer Most?," ifo Working Paper Series 90, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_90
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    Cited by:

    1. Sparber, Chad & Fan, Jasmine Sijie, 2011. "Unemployment, Skills, and the Business Cycle Since 2000," Working Papers 2011-04, Department of Economics, Colgate University, revised 12 Sep 2012.
    2. Akin Serife Nuray, 2012. "Immigration, Fiscal Policy, and Welfare in an Aging Population," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-45, July.

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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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