IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/2025.html
   My bibliography  Save this paper

How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany

Author

Listed:
  • Braun, Sebastian
  • Weber, Henning

Abstract

We draw on two decades of historical data to analyze how regional labor markets in West Germany adjusted to one of the largest forced population movements in history, the mass inflow of eight million German expellees after World War II. The expellee inflow was distributed very asymmetrically across two West German regions. A dynamic two-region search and matching model of unemployment, which is exposed to the asymmetric expellee inflow, closely fits historical data on the regional unemployment differential and the regional migration rate. Both variables increase dramatically after the inflow and decline only gradually over the next decade. We show that despite the large and long-lasting dynamics following the expellee inflow, native workers experience only a modest loss in expected discounted lifetime labor income of 1.38%. Per-period losses in native labor income, however, are up to four times as large. The magnitude of income losses also depends on the initial location and labor market status of native workers. In counterfactual analyses, we furthermore show that economic policy interventions that affect the nature of the immigration inflow can effectively reduce native income losses and dampen adjustment dynamics in regional labor markets. One such intervention is to distribute the inflow more evenly over time. Smaller immigration inflows, similar in magnitude to the refugee inflow that Germany is experiencing today, also reduce native income losses markedly but decrease the duration of labor market adjustment only modestly.

Suggested Citation

  • Braun, Sebastian & Weber, Henning, 2016. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Kiel Working Papers 2025, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:2025
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/128626/1/848637852.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christian Bayer & Falko Juessen, 2012. "On the Dynamics of Interstate Migration: Migration Costs and Self-Selection," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 377-401, July.
    2. Lkhagvasuren, Damba, 2012. "Big locational unemployment differences despite high labor mobility," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 798-814.
    3. Sari Pekkala Kerr & William R. Kerr, 2011. "Economic Impacts of Immigration: A Survey," Finnish Economic Papers, Finnish Economic Association, vol. 24(1), pages 1-32, Spring.
    4. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, January.
    5. Epifani, Paolo & Gancia, Gino A., 2005. "Trade, migration and regional unemployment," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 625-644, November.
    6. Cohen-Goldner, Sarit & Paserman, M. Daniele, 2011. "The dynamic impact of immigration on natives' labor market outcomes: Evidence from Israel," European Economic Review, Elsevier, vol. 55(8), pages 1027-1045.
    7. John DiNardo & David Card, 2000. "Do Immigrant Inflows Lead to Native Outflows?," American Economic Review, American Economic Association, vol. 90(2), pages 360-367, May.
    8. Thomas K. Bauer & Sebastian Braun & Michael Kvasnicka, 2013. "The Economic Integration of Forced Migrants: Evidence for Post‐War Germany," Economic Journal, Royal Economic Society, vol. 123, pages 998-1024, September.
    9. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
    10. Stephen J. Redding & Daniel M. Sturm, 2008. "The Costs of Remoteness: Evidence from German Division and Reunification," American Economic Review, American Economic Association, vol. 98(5), pages 1766-1797, December.
    11. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    12. Braun, Sebastian & Omar Mahmoud, Toman, 2014. "The Employment Effects of Immigration: Evidence from the Mass Arrival of German Expellees in Postwar Germany," The Journal of Economic History, Cambridge University Press, vol. 74(01), pages 69-108, March.
    13. Krause, Michael U. & Lopez-Salido, David & Lubik, Thomas A., 2008. "Inflation dynamics with search frictions: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 892-916, July.
    14. Braun, Sebastian & Kvasnicka, Michael, 2014. "Immigration and structural change: Evidence from post-war Germany," Journal of International Economics, Elsevier, vol. 93(2), pages 253-269.
    15. Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1713-1764, December.
    16. Konrad B. Burchardi & Tarek A. Hassan, 2013. "The Economic Impact of Social Ties: Evidence from German Reunification," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1219-1271.
    17. Monika Merz & Eran Yashiv, 2007. "Labor and the Market Value of the Firm," American Economic Review, American Economic Association, vol. 97(4), pages 1419-1431, September.
    18. Mary Kritz & Douglas Gurak, 2001. "The impact of immigration on the internal migration of natives and immigrants," Demography, Springer;Population Association of America (PAA), vol. 38(1), pages 133-145, February.
    19. Barry Eichengreen & Albrecht Ritschl, 2009. "Understanding West German economic growth in the 1950s," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 3(3), pages 191-219, October.
    20. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    21. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 111-129, February.
    22. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    23. Russell Cooper & John Haltiwanger & Jonathan L. Willis, 2007. "Implications of Search Frictions: Matching Aggregate and Establishment-level Observations," NBER Working Papers 13115, National Bureau of Economic Research, Inc.
    24. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    25. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    26. Paul S. Davies & Michael J. Greenwood & Haizheng Li, 2001. "A Conditional Logit Approach to U.S. State-to-State Migration," Journal of Regional Science, Wiley Blackwell, vol. 41(2), pages 337-360.
    27. Leah Platt Boustan & Price V. Fishback & Shawn Kantor, 2010. "The Effect of Internal Migration on Local Labor Markets:American Cities during the Great Depression," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 719-746, October.
    28. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    29. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, February.
    30. George J. Borjas, 2006. "Native Internal Migration and the Labor Market Impact of Immigration," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
    31. Yashiv, Eran, 2006. "Evaluating the performance of the search and matching model," European Economic Review, Elsevier, vol. 50(4), pages 909-936, May.
    32. Abdurrahman Aydemir & George J. Borjas, 2011. "Attenuation Bias in Measuring the Wage Impact of Immigration," Journal of Labor Economics, University of Chicago Press, vol. 29(1), pages 69-113, January.
    33. Falck Oliver & Heblich Stephan & Link Susanne, 2012. "Forced Migration and the Effects of an Integration Policy in Post-WWII Germany," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-29, May.
    34. Liu, Xiangbo, 2010. "On the macroeconomic and welfare effects of illegal immigration," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2547-2567, December.
    35. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-553, September.
    36. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    37. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
    38. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
    39. Damba Lkhagvasuren, 2005. "Big Locational Differences in Unemployment Despite High Labor Mobility," Working Papers 12002, Concordia University, Department of Economics, revised Feb 2012.
    40. Joan Monras, 2015. "Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis," Sciences Po Economics Discussion Papers 2015-04, Sciences Po Departement of Economics.
    41. Sarah Dolfin, 2006. "An examination of firms' employment costs," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 861-878.
    42. Cooper, Russell & Haltiwanger, John & Willis, Jonathan L., 2007. "Search frictions: Matching aggregate and establishment observations," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 56-78, September.
    43. Christian Dustmann & Albrecht Glitz, 2015. "How Do Industries and Firms Respond to Changes in Local Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 711-750.
    44. Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, April.
    45. Michael C. Burda, 2006. "Factor Reallocation in Eastern Germany after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 368-374, May.
    46. 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.
    47. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
    48. Matthias Schündeln, 2014. "Are Immigrants More Mobile Than Natives? Evidence From Germany," Journal of Regional Science, Wiley Blackwell, vol. 54(1), pages 70-95, January.
    49. Smets, Frank & Beyer, Robert C. M., 2015. "Labour market adjustments in Europe and the US: How different?," Working Paper Series 1767, European Central Bank.
    50. repec:mpr:mprres:5053 is not listed on IDEAS
    51. Yaman, F., 2011. "The costs of adjusting labor: Evidence from temporally disaggregated data," Working Papers 11/10, Department of Economics, City University London.
    52. Adjemian, Stéphane & Bastani, Houtan & Juillard, Michel & Karamé, Fréderic & Maih, Junior & Mihoubi, Ferhat & Perendia, George & Pfeifer, Johannes & Ratto, Marco & Villemot, Sébastien, 2011. "Dynare: Reference Manual Version 4," Dynare Working Papers 1, CEPREMAP, revised Jul 2018.
    53. Michiel Evers & Ruud Mooij & Daniel Vuuren, 2008. "The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates," De Economist, Springer, vol. 156(1), pages 25-43, March.
    54. 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.
    55. Liesbet Okkerse, 2008. "How To Measure Labour Market Effects Of Immigration: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 1-30, February.
    56. David Berger, 2012. "Countercyclical Restructuring and Jobless Recoveries," 2012 Meeting Papers 1179, Society for Economic Dynamics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stähler, Nikolai, 2017. "A model-based analysis of the macroeconomic impact of the refugee migration to Germany," Discussion Papers 05/2017, Deutsche Bundesbank.
    2. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," Working Papers 2017-13, CEPII research center.
    3. Braun, Sebastian & Dwenger, Nadja, 2017. "The local environment shapes refugee integration: Evidence from post-war Germany," Hohenheim Discussion Papers in Business, Economics and Social Sciences 10-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    4. Sebastian Till Braun & Anica Kramer & Michael Kvasnicka, 2017. "Local Labor Markets and the Persistence of Population Shocks," Discussion Paper Series, Department of Economics 201715, Department of Economics, University of St. Andrews.
    5. Jaeger, David A & Ruist, Joakim & Stuhler, Jan, 2018. "Shift-Share Instruments and the Impact of Immigration," CEPR Discussion Papers 12701, C.E.P.R. Discussion Papers.
    6. Stöhr, Tobias & Wichardt, Philipp C., 2016. "Openness to Concerns of Host Country Population Improves Attitudes Towards Immigrants," Annual Conference 2016 (Augsburg): Demographic Change 145574, Verein für Socialpolitik / German Economic Association.
    7. Michael Wyrwich, 2018. "Migration restrictions and long-term regional development: evidence from large-scale expulsions of Germans after World War II," Jena Economic Research Papers 2018-002, Friedrich-Schiller-University Jena.
    8. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," CESifo Working Paper Series 6595, CESifo Group Munich.

    More about this item

    Keywords

    Immigration; labor market adjustments; dynamic search and matching model of unemployment; asymmetric labor supply shock; post-war Germany;

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:2025. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/iwkiede.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.