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The Effects of High Skilled Immigration in a Dual Labour Market with Union Wage Setting and Fiscal Redistribution

  • Moritz Bonn


    (University of Siegen)

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    We study the effects of high skilled immigration on employment and net income in the receiving economy where the market for low skilled labour is distorted by union wage setting and a redistributive unemployment benefit scheme. Based on the empirical fact that high and low skilled workers are close albeit imperfect substitutes, we show that high skilled immigration can either be beneficial or harmful, both in terms of employment and net income. More precisely, we conclude that a Pareto improvement can be achieved if the unemployment benefit level remains unaffected by high skilled immigration whereas an overall loss in net income cannot be ruled out if we suggest unemployment benefits to be funded by an exogenous egalitarian tax rate.

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    File Function: First version, 2011
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    Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201121.

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    Length: 16pages
    Date of creation: 2011
    Date of revision:
    Publication status: Forthcoming in
    Handle: RePEc:mar:magkse:201121
    Contact details of provider: Postal: Universitätsstraße 25, 35037 Marburg
    Phone: 06421/28-1722
    Fax: 06421/28-4858
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    1. Giovanni Facchini & Anna Maria Mayda, 2009. "Does the Welfare State Affect Individual Attitudes toward Immigrants? Evidence across Countries," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 295-314, May.
    2. Alexander Kemnitz, 2008. "Native Welfare Losses from High Skilled Immigration," CESifo Working Paper Series 2409, CESifo Group Munich.
    3. Frédéric Docquier & Çaǧlar Özden & Giovanni Peri, 2010. "The Wage Effects of Immigration and Emigration," NBER Working Papers 16646, National Bureau of Economic Research, Inc.
    4. Facchini, Giovanni & Mayda, Anna Maria, 2008. "From individual attitudes towards migrants to migration policy outcomes: Theory and evidence," CEPR Discussion Papers 6835, C.E.P.R. Discussion Papers.
    5. O'Rourke, Kevin H. & Sinnott, Richard, 2006. "The determinants of individual attitudes towards immigration," European Journal of Political Economy, Elsevier, vol. 22(4), pages 838-861, December.
    6. Clemens Fuest & Marcel Thum, 1999. "Immigration and Skill Formation in Unionised Labour Markets," CESifo Working Paper Series 214, CESifo Group Munich.
    7. Francesc Ortega & Giovanni Peri, 2009. "The Causes and Effects of International Migrations: Evidence from OECD Countries 1980-2005," NBER Working Papers 14833, National Bureau of Economic Research, Inc.
    8. Fuest, Clemens & Thum, Marcel, 2000. "Welfare effects of immigration in a dual labor market," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 551-563, September.
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