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Modeling Migration-Induced Unemployment

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  • Pascal Michaillat

Abstract

Immigration is often blamed for increasing unemployment among local workers. However, standard models, such as the neoclassical model and the Diamond-Mortensen-Pissarides matching model, inherently assume that immigrants are absorbed into the labor market without affecting local unemployment. This paper presents a more general model of migration that allows for the possibility that not only the wages but also the unemployment rate of local workers may be affected by the arrival of newcomers. This extension is essential to capture the full range of potential impacts of labor migration on labor markets. The model blends a matching framework with job rationing. In it, the arrival of new workers can raise the unemployment rate among local workers, particularly in a depressed labor market where job opportunities are limited. On the positive side, in-migration helps firms fill vacancies more easily, boosting their profits. The overall impact of in-migration on local welfare varies with labor market conditions: in-migration reduces welfare when the labor market is inefficiently slack, but it enhances welfare when the labor market is inefficiently tight.

Suggested Citation

  • Pascal Michaillat, 2024. "Modeling Migration-Induced Unemployment," NBER Working Papers 33047, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33047
    Note: EFG LS POL
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    Cited by:

    1. Pascal Michaillat & Emmanuel Saez, 2024. "Beveridgean Phillips Curve," Papers 2401.12475, arXiv.org, revised Oct 2024.

    More about this item

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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