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The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach

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  • Michael Gerfin
  • Boris Kaiser

Abstract

This paper investigates how recent immigration inflows from 2002 to 2008 have affected wages in Switzerland. This period is of particular interest as it marks the time during which the bilateral agreement with the EU on the free cross-border movement of workers has been effective. Since different types of workers are likely to be unevenly affected by recent immigration inflows, we follow the "structural skill-cell approach". This paper provides two main contributions. First, we estimate empirically the elasticities of substitution between different types of workers in Switzerland. Our results suggest that natives and immigrants are imperfect substitutes. Regarding different skill levels, the estimates indicate that workers are imperfect substitutes across broad education groups and across different experience groups. Second, the estimated elasticities of substitution are used to simulate the impact on domestic wages using the actual immigration inflows from 2002 to 2008. For the long run, the simulations produce some notable distributional consequences across different types of workers: While previous immigrants incur wage losses (-1.6%), native workers are not negatively affected on average (+0.4%). In the short run, immigration has a negative macroeconomic effect on the average wage, which, however, gradually dies out in the process of capital adjustment.

Suggested Citation

  • Michael Gerfin & Boris Kaiser, 2010. "The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach," Diskussionsschriften dp1012, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp1012
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    References listed on IDEAS

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    1. Michael Gerfin & Boris Kaiser, 2010. "The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(IV), pages 709-739, December.
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    Cited by:

    1. Michael Gerfin & Boris Kaiser, 2010. "The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(IV), pages 709-739, December.
    2. Edo Anthony, 2015. "The Impact of Immigration on Native Wages and Employment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1151-1196, July.
    3. Edo, Anthony & Toubal, Farid, 2017. "Immigration and the gender wage gap," European Economic Review, Elsevier, vol. 92(C), pages 196-214.
    4. Marco Pecoraro & Didier Ruedin, 2016. "A Foreigner Who Does Not Steal My Job: The Role of Unemployment Risk and Values in Attitudes toward Equal Opportunities," International Migration Review, Wiley Blackwell, vol. 50(3), pages 628-666, September.
    5. Jan Ruffner & Michael Siegenthaler, 2016. "From Labor to Cash Flow? The Abolition of Immigration Restrictions and the Performance of Swiss Firms," KOF Working papers 16-424, KOF Swiss Economic Institute, ETH Zurich.
    6. Anthony Edo, 2016. "How do rigid labor markets absorb immigration? Evidence from France," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    7. Sandro Favre, 2011. "The impact of immigration on the wage distribution in Switzerland," ECON - Working Papers 022, Department of Economics - University of Zurich.
    8. Siegenthaler, Michael & Basten, Christoph, 2013. "Do immigrants take or create residents jobs? Quasi-experimental evidence from Switzerland," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79780, Verein für Socialpolitik / German Economic Association.
    9. Anthony Edo & Farid Toubal, 2015. "Selective Immigration Policies and Wages Inequality," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 160-187, February.
    10. Christoph Basten & Michael Siegenthaler, 2013. "Do immigrants take or create residents' jobs?," KOF Working papers 13-335, KOF Swiss Economic Institute, ETH Zurich.

    More about this item

    Keywords

    Immigration; Wages; Labour Demand; Labour Supply; Skill Groups;

    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
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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