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The macroeconomic consequences of migration diversion: evidence for Germany and the UK

Author

Listed:
  • Timo Baas

    () (Institute for Employment Research (IAB) and Free University of Berlin)

  • Herbert Brücker

    () (University of Bamberg, Institute for Employment Research (IAB) and IZA)

Abstract

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.

Suggested Citation

  • Timo Baas & Herbert Brücker, 2012. "The macroeconomic consequences of migration diversion: evidence for Germany and the UK," Norface Discussion Paper Series 2012010, Norface Research Programme on Migration, Department of Economics, University College London.
  • Handle: RePEc:nor:wpaper:2012010
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    1. repec:aes:amfeco:v:46:y:2017:i:19:p:772 is not listed on IDEAS
    2. Marchal, Léa & Naiditch, Claire, 2016. "A micro-funded theory of multilateral resistance to migration," Kiel Working Papers 2051, Kiel Institute for the World Economy (IfW).
    3. Katerina Lisenkova & Miguel Sanchez-Martinez, 2016. "The long-term macroeconomic effects of lower migration to the UK," National Institute of Economic and Social Research (NIESR) Discussion Papers 460, National Institute of Economic and Social Research.
    4. Guenter Karl Haag & Philipp Liedl & Barbara Schwengler & Ekaterini Sdogou, 2014. "Forecasting of the effects of the last economic crisis and simulation of the potential emergence of new regional structure in Germany," Economics and Business Letters, Oviedo University Press, vol. 3(4), pages 276-287.
    5. Cosimo Beverelli & Gianluca Orefice & Nadia Rocha, 2016. "The Impact of Offshoring and Migration Policies on Migration Flows," Working Papers 2016-21, CEPII research center.
    6. Elsner, Benjamin & Zimmermann, Klaus F., 2013. "10 Years After: EU Enlargement, Closed Borders, and Migration to Germany," IZA Discussion Papers 7130, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    EU Eastern enlargement; international migration; computable equilibrium model; wage-setting.;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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