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Wages and Employment Effects of Immigration to Germany: An Analysis Based on Local Labor Markets

Author

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  • Pischke, J.S.
  • Velling, J.

Abstract

We analyse the impact of increased immigration on labour market outcomes of natives in Germany using a dataset of county-level variables for the late 1980s. We study two measures of immigration, the change in the share of foreigners between 1985 and 1989, and one-year gross and net flows of immigrants to an area. In order to address the potential problem of immigrant bias towards local labour markets with above average performance we instrument the change in the foreign share by its previous level. Especially for unemployment we find large effects of an increased foreign share. We conjecture that these results might be spurious. Foreigners tend to be concentrated in lower unemployment areas but unemployment tends to be mean reverting during the boom period we study. This leads to a positive correlation between the instrument and the change in unemployment. Taking account of the mean reversion in unemployment we find no detrimental effect of immigration. Similar results are obtained on the basis of one-year flow data of foreigners. We also find no support for the hypothesis that the absence of displacement effects are due to a response of native migration patterns. The initial settlement of immigrants in Germany is largely independent of labour market conditions. Subsequent internal moves by foreigners are more responsive to local unemployment albeit much less than internal migration of natives.
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Suggested Citation

  • Pischke, J.S. & Velling, J., 1994. "Wages and Employment Effects of Immigration to Germany: An Analysis Based on Local Labor Markets," Working papers 94-08, Massachusetts Institute of Technology (MIT), Department of Economics.
    • Handle: RePEc:mit:worpap:94-08
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    Cited by:

    1. Kit‐Chun Lam & Pak‐Wai Liu, 1998. "Immigration, Population Heterogeneity, And Earnings Inequality In Hong Kong," Contemporary Economic Policy, Western Economic Association International, vol. 16(3), pages 265-276, July.
    2. Thomas Bauer, 1998. "Do Immigrants Reduce Natives' Wages? Evidence from Germany," Departmental Working Papers 199802, Rutgers University, Department of Economics.
    3. Baez, Javier E., 2011. "Civil wars beyond their borders: The human capital and health consequences of hosting refugees," Journal of Development Economics, Elsevier, vol. 96(2), pages 391-408, November.
    4. Sari Pekkala Kerr & William R. Kerr, 2011. "Economic Impacts of Immigration: A Survey," Finnish Economic Papers, Finnish Economic Association, vol. 24(1), pages 1-32, Spring.
    5. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    6. Antje Mertens & Anette Haas, 2006. "Regionale Arbeitslosigkeit und Arbeitsplatzwechsel in Deutschland – Eine Analyse auf Kreisebene," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 26(2), pages 147-169, October.
    7. Antje Mertens & Anette Haas, 2005. "Regional Unemployment and Job Switches in Germany – An Analysis at District Level," ERSA conference papers ersa05p592, European Regional Science Association.
    8. Kalckreuth, Ulf von, 2000. "Ethnic Dualism and Communication Costs – Explaining Segmentation and Wage Inertia," Discussion Papers 593, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    9. Velling, Johannes, 1995. "Die Arbeitserlaubnis als Instrument der Arbeitsmarktpolitik zur Steuerung internationaler Zuwanderung auf den Arbeitsmarkt," ZEW Discussion Papers 95-16, ZEW - Leibniz Centre for European Economic Research.
    10. Zweimuller, Josef & Winter-Ebmer, Rudolf, 1995. "Internal labor markets and firm-specific determination of earnings in the presence of immigrant workers," Economics Letters, Elsevier, vol. 48(2), pages 185-191, May.
    11. Leire Aldaz Odriozola & Begoña Eguía Peña, 2016. "Immigration and Occupational Mobility of Native Workers in Spain. A Gender Perspective," Journal of International Migration and Integration, Springer, vol. 17(4), pages 1181-1193, November.
    12. Steinhardt, Max Friedrich, 2006. "Arbeitsmarkt und Migration: Eine empirische Analyse der Lohn- und Beschäftigungseffekte der Zuwanderung für Deutschland," HWWI Research Papers 3-4, Hamburg Institute of International Economics (HWWI).

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    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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