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Migration and Imperfect Labor Markets: Theory and Cross-Country Evidence from Denmark, Germany and the UK

Author

Listed:
  • Brücker, Herbert

    () (Institute for Employment Research (IAB), Nuremberg)

  • Jahn, Elke J.

    () (University of Bayreuth)

  • Upward, Richard

    () (University of Nottingham)

Abstract

We investigate the labor market effects of immigration in Denmark, Germany and the UK, three countries which are characterized by considerable differences in labor market institutions and welfare states. Institutions such as collective bargaining, minimum wages, employment protection and unemployment benefits affect the way in which wages respond to labor supply shocks, and, hence, the labor market effects of immigration. We employ a wage-setting approach which assumes that wages decline with the unemployment rate, albeit imperfectly. We find that wage flexibility is substantially higher in the UK compared to Germany and, in particular, Denmark. As a consequence, immigration has a much larger effect on the unemployment rate in Germany and Denmark, while the wage effects are larger in the UK. Moreover, the elasticity of substitution between natives and foreign workers is high in the UK and particularly low in Germany. Thus, the preexisting foreign labor force suffers more from further immigration in Germany than in the UK.

Suggested Citation

  • Brücker, Herbert & Jahn, Elke J. & Upward, Richard, 2012. "Migration and Imperfect Labor Markets: Theory and Cross-Country Evidence from Denmark, Germany and the UK," IZA Discussion Papers 6713, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6713
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    Cited by:

    1. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," Working Papers 2017-13, CEPII research center.
    2. Shusaku Sasaki & Naoko Okuyama & Masao Ogaki & Fumio Ohtake, 2017. "Education and pro-family altruistic discrimination against foreigners: Five-country comparisons," ISER Discussion Paper 1002, Institute of Social and Economic Research, Osaka University.
    3. Timo Baas & Marjan Aikimbaeva, 2016. "Macroeconomic Stability and the Single European Labor Market," EcoMod2016 9555, EcoMod.
    4. Baas, Timo & Melzer, Silvia, 2016. "The Macroeconomic Impact of Remittances: A Sending Country Perspective," Annual Conference 2016 (Augsburg): Demographic Change 145631, Verein für Socialpolitik / German Economic Association.
    5. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2013. "Migration, unemployment, and skill downgrading : a specific-factors approach," IAB Discussion Paper 201313, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Claudia Cigagna & Giovanni Sulis, 2015. "On the potential interaction between labour market institutions and immigration policies," International Journal of Manpower, Emerald Group Publishing, vol. 36(4), pages 441-468, July.
    7. repec:ebl:ecbull:eb-18-00126 is not listed on IDEAS
    8. Edo, Anthony & Toubal, Farid, 2017. "Immigration and the gender wage gap," European Economic Review, Elsevier, vol. 92(C), pages 196-214.
    9. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," CESifo Working Paper Series 6595, CESifo Group Munich.
    10. Anthony Edo, 2016. "How do rigid labor markets absorb immigration? Evidence from France," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    11. Anthony Edo & Hillel Rapoport, 2017. "Minimum Wages and the Labor Market Effects of Immigration," CESifo Working Paper Series 6547, CESifo Group Munich.
    12. Weber, Enzo & Weigand, Roland, 2016. "Identifying macroeconomic effects of refugee migration to Germany," IAB Discussion Paper 201620, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    13. Clark, Ken & Drinkwater, Stephen & Robinson, Catherine, 2014. "Migration, Economic Crisis and Adjustment in the UK," IZA Discussion Papers 8410, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    panel data; labor markets; wages; unemployment; immigration; comparative studies;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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