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Protective or Counter-Productive? European Labor Market Institutions and the Effect of Immigrants on EU Natives

  • Joshua Angrist
  • Adriana Kugler

We estimate the effect of immigrant flows on native employment in Western Europe, and then ask whether the employment consequences of immigration vary with institutions that affect labor market flexibility. Reduced flexibility may protect natives from immigrant competition in the near term, but our theoretical framework suggests that reduced flexibility is likely to increase the negative impact of immigration on equilibrium employment. In models without interactions, OLS estimates for a panel of European countries in the 1980s and 1990s show small, mostly negative immigration effects. To reduce bias from the possible endogeneity of immigration flows, we use the fact that many immigrants arriving after 1991 were refugees from the Balkan wars. An IV strategy based on variation in the number of immigrants from former Yugoslavia generates larger though mostly insignificant negative estimates. We then estimate models allowing interactions between the employment response to immigration and institutional characteristics including business entry costs. These results, limited to the sample of native men, generally suggest that reduced flexibility increases the negative impact of immigration. Many of the estimated interaction terms are significant, and imply a significant negative effect on employment in countries with restrictive institutions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8660.

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Date of creation: Dec 2001
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Publication status: published as Angrist, Joshua D. and Adriane D. Kugler. "Protective Or Counter-Productive? Labour Market Institutions And The Effect Of Immigration On EU Natives," Economic Journal, 2003, v113(488,Jun), F302-331.
Handle: RePEc:nbr:nberwo:8660
Note: LS
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  1. Joseph G. Altonji & David Card, 1991. "The Effects of Immigration on the Labor Market Outcomes of Less-skilled Natives," NBER Chapters, in: Immigration, Trade, and the Labor Market, pages 201-234 National Bureau of Economic Research, Inc.
  2. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  3. Jörn-Steffen Pischke & Johannes Velling, 1997. "Employment Effects Of Immigration To Germany: An Analysis Based On Local Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 594-604, November.
  4. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
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  8. Assaf Razin & Efraim Sadka, 1996. "Suppressing resistance to low-skill migration," International Tax and Public Finance, Springer, vol. 3(3), pages 413-424, July.
  9. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Working papers 98-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Dolado, Juan J. & Duce, Rosa & Jimeno, Juan F, 1996. "The Effects of Migration on the Relative Demand of Skilled versus Unskilled Labour: Evidence from Spain," CEPR Discussion Papers 1476, C.E.P.R. Discussion Papers.
  11. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  12. repec:fth:inseep:2001-12 is not listed on IDEAS
  13. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, October.
  14. Robert J. LaLonde & Robert H. Topel, 1991. "Labor Market Adjustments to Increased Immigration," NBER Chapters, in: Immigration, Trade, and the Labor Market, pages 167-199 National Bureau of Economic Research, Inc.
  15. Winter-Ebmer, Rudolf & Zweimüller, Josef, 1996. "Immigration, Trade, and Austrian Unemployment," CEPR Discussion Papers 1346, C.E.P.R. Discussion Papers.
  16. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  17. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Report No. 3: Assessment of Possible Migration Pressure and its Labour Market Impact Following EU Enlargement to Central and Eastern Europe," IZA Research Reports 3, Institute for the Study of Labor (IZA).
  18. George E. Johnson, 1980. "The labor market effects of immigration," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(3), pages 331-341, April.
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  20. Schmidt, Christoph M. & Stilz, Anette & Zimmermann, Klaus F., 1994. "Mass migration, unions, and government intervention," Journal of Public Economics, Elsevier, vol. 55(2), pages 185-201, October.
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