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Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment

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  • Christian Dustman

    () (University College London)

  • Uta Schönberg

    (University College London)

  • Jan Stuhler

    () (Universidad Carlos III de Madrid)

Abstract

By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standard models of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or non-employment, suggesting that “outsiders†shield “insiders†from the increased competition.

Suggested Citation

  • Christian Dustman & Uta Schönberg & Jan Stuhler, 2016. "Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment," CReAM Discussion Paper Series 1617, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  • Handle: RePEc:crm:wpaper:1617
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:eecrev:v:98:y:2017:i:c:p:282-315 is not listed on IDEAS
    2. repec:iab:iabdpa:201806 is not listed on IDEAS
    3. John Gardner, 2016. "Immigration and wages: new evidence from the African American Great Migration," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-45, December.
    4. Anthony Edo & Lionel Ragot & Hillel Rapoport & Sulin Sardoschau & Andreas Steinmayr, 2018. "The Effects of Immigration in Developed Countries: Insights from Recent Economic Research," CEPII Policy Brief 2018-22, CEPII research center.
    5. Angela Parenti & Cristina Tealdi, 2017. "Does the abolition of border controls boost cross-border commuting? Evidence from Switzerland," Discussion Papers 2017/213, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    6. Aydemir, Abdurrahman B. & Kırdar, Murat G., 2017. "Quasi-experimental impact estimates of immigrant labor supply shocks: The role of treatment and comparison group matching and relative skill composition," European Economic Review, Elsevier, vol. 98(C), pages 282-315.
    7. Samuel Muehlemann & Gerard Pfann & Harald Pfeifer & Hans Dietrich, 2018. "The Effects of Supply Shocks in the Market for Apprenticeships: Evidence from a German High School Reform," Economics of Education Working Paper Series 0143, University of Zurich, Department of Business Administration (IBW).
    8. Christian Dustmann & Uta Schönberg & Jan Stuhler, 2016. "The Impact of Immigration: Why Do Studies Reach Such Different Results?," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 31-56, Fall.

    More about this item

    Keywords

    Immigration; wage effects; labor supply elasticity; internal migration;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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