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Immigration, Monopsony and the Distribution of Firm Pay

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  • Amior, Michael
  • Stuhler, Jan

Abstract

We argue that the arrival of immigrants with low reservation wages can strengthen the monopsony power of firms. Firms can exploit “cheap†migrant labor by offering lower wages, though at the cost of forgoing potential native hires who demand higher wages. This monopsonistic trade-off can lead to large negative effects on native employment, which exceed those in competitive models, and which are concentrated among low-paying firms. To validate these predictions, we study changes in wage premia and employment across the firm pay distribution, during a large immigration wave in Germany. These adverse effects are not inevitable, and may be ameliorated through policies which constrain firms’ monopsony power over migrants.

Suggested Citation

  • Amior, Michael & Stuhler, Jan, 2023. "Immigration, Monopsony and the Distribution of Firm Pay," CEPR Discussion Papers 18709, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18709
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    Cited by:

    1. is not listed on IDEAS
    2. Silliman, Mikko & Willén, Alexander, 2024. "Worker Power, Immigrant Sorting, and Firm Dynamics," Discussion Paper Series in Economics 13/2024, Norwegian School of Economics, Department of Economics.
    3. Willis, Sébastien, 2025. "Workplace segregation and the labour market performance of immigrants," Labour Economics, Elsevier, vol. 93(C).
    4. Tessa Hall & Alan Manning & Rebecca Rose, 2024. "Ethnic minority and migrant pay gaps over the life-cycle," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 40(3), pages 556-578.
    5. Christian Dustmann & Sebastian Otten & Uta Schönberg & Jan Stuhler, 2025. "The Effects of Immigration on Places and People - Identification and Interpretation," RFBerlin Discussion Paper Series 2586, ROCKWOOL Foundation Berlin (RFBerlin).
    6. Tino, Stephen, 2025. "Labour market power, firm productivity, and the immigrant-native pay gap," CLEF Working Paper Series 88, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    7. Ezgi Kaya, 2025. "Differences in labour market outcomes between immigrant and UK‐born employees: evidence from linked data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 127(4), pages 765-808, October.
    8. Christian Dustmann & Uta Schoenberg, 2025. "Linking Empirical Evidence to Theory: A Framework for Understanding Immigrations Labor Market Effects," RFBerlin Discussion Paper Series 2522, ROCKWOOL Foundation Berlin (RFBerlin).

    More about this item

    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • 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
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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