The macroeconomic consequences of migration diversion: evidence for Germany and the UK
This paper examines the macroeconomic consequences of the diversion of migration ﬂows away from Germany towards the UK in the course of the EU’s Eastern Enlargement. The EU has agreed transitional periods for the free movement of workers with the new member states from Central and Eastern Europe. The selective application of migration restrictions during the transitional periods has resulted in a reversal of the pre-enlargement allocation of migration ﬂows from the new member states across the EU. Based on a forecast of the migration potential under the conditions of free movement and of the transitional arrangements, we employ a CGE model with imperfect labour markets to analyse the macroeconomic eﬀects of this diversion process. We ﬁnd that EU Eastern enlargement has increased in the GDP per capita in the UK substantially, but that the diversion of migration ﬂows towards the UK has reduced wage gains and the decline in unemployment there. The eﬀects of the EU Eastern enlargement are less favourable for Germany, but the diversion of migration ﬂows has protected workers there against a detrimental impact on wages and unemployment.
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