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Migration and Wage-Setting: Reassessing the Labor Market Effects of Migration

  • Herbert Brücker
  • Elke J. Jahn

This paper employs a wage-setting approach to analyze the labor market effects of immigration into Germany. The wage-setting framework relies on the assumption that wages tend to decline with the unemployment rate, albeit imperfectly. This enables us to consider labor market rigidities, which are particularly relevant in Europe. We find that the elasticity of the wage-setting curve is particularly high for young and well-educated workers. The labor market effects of immigration are moderate: a 1 percent increase in the German labor force through immigration increases the unemployment rate by less than 0.1 percentage points and reduces wages by 0.1 percent

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1502.

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Length: 43 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:kie:kieliw:1502
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  4. Herbert Brücker & Parvati Trübswetter, 2004. "Do the Best Go West?: An Analysis of the Self-Selection of Employed East-West Migrants in Germany," Discussion Papers of DIW Berlin 396, DIW Berlin, German Institute for Economic Research.
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  16. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
  17. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  18. Paul Levine, 1999. "The welfare economics of immigration control," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(1), pages 23-43.
  19. Christian Dustmann & Francesca Fabbri & Ian Preston, 2005. "The Impact of Immigration on the British Labour Market," Economic Journal, Royal Economic Society, vol. 115(507), pages F324-F341, November.
  20. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  21. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2006. "The impact of immigration on the structure of male wages: theory and evidence from Britain," LSE Research Online Documents on Economics 19797, London School of Economics and Political Science, LSE Library.
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  24. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
  25. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2007. "Phillips Curve or wage curve? : evidence from West Germany: 1980-2004," IAB Discussion Paper 200714, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  26. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
  27. Holger Bonin & Bernd Raffelhüschen & Jan Walliser, 2000. "Can Immigration Alleviate the Demographic Burden?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(1), pages 1-, September.
  28. Bonin, Holger, 2005. "Wage and Employment Effects of Immigration to Germany: Evidence from a Skill Group Approach," IZA Discussion Papers 1875, Institute for the Study of Labor (IZA).
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  30. Abdurrahman Aydemir & George J. Borjas, 2007. "Cross-Country Variation in the Impact of International Migration: Canada, Mexico, and the United States," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 663-708, 06.
  31. Rachel M. Friedberg, 2001. "The Impact of Mass Migration on the Israeli Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1373-1408.
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