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Heterogeneous Firms and Imperfect Substitution: The Productivity Effect of Migrants

  • Anette Haas
  • Michael Lucht

    ()

    (Institut für Arbeitsmarkt- und Berufsforschung (IAB))

To examine the impact of migrants on the average firm productivity, wages and welfare we construct a general equilibrium model with monopolistic competition a la Melitz (2003) considering heterogeneous firms with different productivity levels and imperfect substitutability between migrants and natives. This gives rise to wage differences between natives and migrants. As a consequence firms with a higher share of migrants realize wage cost advantages. The heterogeneous distribution of migrants in our model might foster regional disparities. In the long run equilibrium it depends on the migrant share, which kind of firms survive in the market. Above a certain migrant share only those firms stay in the market which are highly productive or are able to compensate a lower productivity level by wage cost advantages. By modeling this process, we show that a higher migrant share may explain a higher average productivity in a region. Though the relative wages of natives to migrants increase in the migrant share, in contrast the welfare effects for natives are ambiguous: it might be the case that in a region with a higher migrant share the welfare of a native can be lower compared to a worker in a region of the same size with lower migrant share.

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Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2013019.

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Date of creation: Sep 2013
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Handle: RePEc:nor:wpaper:2013019
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  1. Gianmarco I. P. Ottaviano & Francesco D’Amuri & Giovanni Peri, 2008. "The Labor Market Impact of Immigration in Western Germany in the 1990’s," Working Papers 2008.16, Fondazione Eni Enrico Mattei.
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  3. Pedro S. Martins, Matloob Piracha and José Varejão, 2013. "Do Immigrants Displace Native Workers? Evidence from Matched Panel Data," Working Papers 44, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  4. Gianmarco I.P. Ottaviano & Giovanni Peri, 2012. "The effects of immigration on US wages and rents: a general equilibrium approach," Chapters, in: Migration Impact Assessment, chapter 3, pages 107-146 Edward Elgar Publishing.
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  10. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
  11. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  12. Möller, Joachim & Haas, Anette, 2002. "The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997," ERSA conference papers ersa02p327, European Regional Science Association.
  13. David Card, 2007. "How Immigration Affects U.S. Cities," CReAM Discussion Paper Series 0711, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  14. Herbert Brücker & Elke J. Jahn, 2009. "Migration and Wage-Setting: Reassessing the Labor Market Effects of Migration," Kiel Working Papers 1502, Kiel Institute for the World Economy.
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