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Explaining Cross-Country Differences in Labor Market Gaps between Immigrants and Natives in the OECD




In most OECD-countries, immigrants have lower employment and higher unemployment than natives. This paper compares nine potential explanations of these gaps. Results are obtained for 21–28 countries using bivariate correlations, OLS-regressions and Bayesian model averaging over all 512 theoretically possible model specifications. Two robust patterns are found. The unemployment gap is bigger in countries where collective bargaining agreements cover a larger share of the labor market. The employment gap is bigger in countries with more generous social safety nets. Five variables have explanatory value in some specifications: Xenophobia, employment protection laws, social expenditure, asylum applications, and the share of immigrants in the population. The education of immigrants and migrant integration policies have no explanatory value. A trade-off seems to exist such that countries with smaller labor market gaps have higher income inequality.

Suggested Citation

  • Bergh, Andreas, 2014. "Explaining Cross-Country Differences in Labor Market Gaps between Immigrants and Natives in the OECD," Working Paper Series 1036, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:1036

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    References listed on IDEAS

    1. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
    2. Skedinger, Per, 2011. "Employment Consequences of Employment Protection Legislation," Working Paper Series 865, Research Institute of Industrial Economics.
    3. Paul Levine & Emanuela Lotti & Joseph Pearlman & Richard Pierse, 2010. "Growth And Welfare Effects Of World Migration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(5), pages 615-643, November.
    4. Kjetil Storesletten, 2003. "Fiscal Implications of Immigration-A Net Present Value Calculation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 487-506, September.
    5. Nannestad, Peter, 2004. "Immigration as a challenge to the Danish welfare state?," European Journal of Political Economy, Elsevier, vol. 20(3), pages 755-767, September.
    6. Fenella Fleischmann & Jaap Dronkers, 2010. "Unemployment among immigrants in European labour markets: an analysis of origin and destination effects," Work, Employment & Society, British Sociological Association, vol. 24(2), pages 337-354, June.
    7. Nannestad, Peter, 2009. "Unproductive immigrants: A socially optimal policy for rational egalitarians," European Journal of Political Economy, Elsevier, vol. 25(4), pages 562-566, December.
    8. Wright, Robert E & Maxim, Paul S, 1993. "Immigration Policy and Immigrant Quality: Empirical Evidence from Canada," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(4), pages 337-352, November.
    9. Borooah, Vani K. & Mangan, John, 2007. "Living here, born there: The economic life of Australia's immigrants," European Journal of Political Economy, Elsevier, vol. 23(2), pages 486-511, June.
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    More about this item


    Labor market segregation; Immigration; Insider-outside hypothesis;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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