IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1502.html
   My bibliography  Save this paper

Migration and wage-setting: reassessing the labor market effects of migration

Author

Listed:
  • Brücker, Herbert
  • Jahn, Elke J.

Abstract

This paper employs a wage-setting approach to analyze the labor market effects of immigration into Germany. The wage-setting framework relies on the assumption that wages tend to decline with the unemployment rate, albeit imperfectly. This enables us to consider labor market rigidities, which are particularly relevant in Europe. We find that the elasticity of the wage-setting curve is particularly high for young and well-educated workers. The labor market effects of immigration are moderate: a 1 percent increase in the German labor force through immigration increases the unemployment rate by less than 0.1 percentage points and reduces wages by 0.1 percent.

Suggested Citation

  • Brücker, Herbert & Jahn, Elke J., 2009. "Migration and wage-setting: reassessing the labor market effects of migration," Kiel Working Papers 1502, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1502
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/28330/1/598250166.PDF
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Manacorda, Marco & Manning, Alan & Wadsworth, Jonathan, 2006. "The impact of immigration on the structure of male wages: theory and evidence from Britain," LSE Research Online Documents on Economics 19797, London School of Economics and Political Science, LSE Library.
    2. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
    3. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," European Economic Review, Elsevier, vol. 52(8), pages 1398-1423, November.
    4. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 35-78.
    5. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    6. Herbert Brücker & Parvati Trübswetter, 2007. "Do the best go west? An analysis of the self-selection of employed East-West migrants in Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(4), pages 371-395, September.
    7. Zimmermann, Klaus F., 1999. "Ethnic German Migration since 1989 - Results and Perspectives/ Aussiedler seit 1989 - Bilanz und Perspektiven," IZA Discussion Papers 50, Institute of Labor Economics (IZA).
    8. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    9. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    10. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    11. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 2021. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 8, pages 163-234, World Scientific Publishing Co. Pte. Ltd..
    12. Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2009. "The Impact of Immigration on the Employment of Natives in Regional Labour Markets: A Meta-Analysis," Chapters, in: Jacques Poot & Brigitte Waldorf & Leo van Wissen (ed.), Migration and Human Capital, chapter 9, pages 173-194, Edward Elgar Publishing.
    13. Bernd Fitzenberger & Aderonke Osikominu & Robert Völter, 2006. "Imputation Rules to Improve the Education Variable in the IAB Employment Subsample," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(3), pages 405-436.
    14. George J. Borjas & Jeffrey Grogger & Gordon H. Hanson, 2008. "Imperfect Substitution between Immigrants and Natives: A Reappraisal," NBER Working Papers 13887, National Bureau of Economic Research, Inc.
    15. Paul Levine, 1999. "The welfare economics of immigration control," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(1), pages 23-43.
    16. Francesco D’Amuri & Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "The labor market impact of immigration in Western Germany in the 1990s," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 8, pages 223-243, World Scientific Publishing Co. Pte. Ltd..
    17. Richard B. Freeman, 2006. "People Flows in Globalization," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 145-170, Spring.
    18. Jörn-Steffen Pischke & Johannes Velling, 1997. "Employment Effects Of Immigration To Germany: An Analysis Based On Local Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 594-604, November.
    19. Joshua D. Angrist & Adriana D. Kugler, 2003. "Protective or counter-productive? labour market institutions and the effect of immigration on eu natives," Economic Journal, Royal Economic Society, vol. 113(488), pages 302-331, June.
    20. Olivier Blanchard, 2007. "A Review of Richard Layard, Stephen Nickell, and Richard Jackman's Unemployment: Macroeconomic Performance and the Labour Market," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 410-418, June.
    21. Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002. "Wage equations, wage curves and all that," Labour Economics, Elsevier, vol. 9(3), pages 341-360, July.
    22. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    23. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, April.
    24. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    25. Gianmarco I. P. Ottaviano & Giovanni Peri, 2016. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 2, pages 35-80 World Scientific Publishing Co. Pte. Ltd..
    26. George J. Borjas, 2021. "Self-Selection and the Earnings of Immigrants," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 4, pages 69-91, World Scientific Publishing Co. Pte. Ltd..
    27. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    28. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, September.
    29. World Bank, 2007. "World Development Indicators 2007," World Bank Publications - Books, The World Bank Group, number 8150.
    30. repec:iab:iabfme:200503(en is not listed on IDEAS
    31. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
    32. Bonin, Holger, 2005. "Wage and Employment Effects of Immigration to Germany: Evidence from a Skill Group Approach," IZA Discussion Papers 1875, Institute of Labor Economics (IZA).
    33. Tito Boeri & Herbert Brücker, 2005. "Why are Europeans so tough on migrants? [‘What a difference a constant makes: how predictable are international migration flows?’ in OECD]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(44), pages 630-703.
    34. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2007. "Phillips Curve or wage curve? : evidence from West Germany: 1980-2004," IAB-Discussion Paper 200714, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    35. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    36. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague.
    37. Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
    38. Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-1043, September.
    39. Nicholas Kaldor, 1961. "Capital Accumulation and Economic Growth," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, chapter 0, pages 177-222, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrea Grabmayer & Andrea Hartmann & Maria Thalhammer, 2009. "Labour Mobility within the EU in the Context of Enlargement and the Functioning of the Transitional Arrangements," WIFO Studies, WIFO, number 35641, April.
    2. Brücker, Herbert & Hauptmann, Andreas & Jahn, Elke J. & Upward, Richard, 2014. "Migration and imperfect labor markets: Theory and cross-country evidence from Denmark, Germany and the UK," European Economic Review, Elsevier, vol. 66(C), pages 205-225.
    3. Francesco D’Amuri & Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "The labor market impact of immigration in Western Germany in the 1990s," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 8, pages 223-243, World Scientific Publishing Co. Pte. Ltd..
    4. Berger, Johannes & Strohner, Ludwig, 2022. "Can labour mobility reduce imbalances in the euro area?," Research Papers 20, EcoAustria – Institute for Economic Research.
    5. Ottaviano, Gianmarco & Peri, Giovanni, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," CEPR Discussion Papers 6916, C.E.P.R. Discussion Papers.
    6. Gabriel Felbermayr & Wido Geis & Wilhelm Kohler, 2014. "Restrictive Immigration Policy in Germany: Pains and Gains Foregone?," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 12, pages 395-419, World Scientific Publishing Co. Pte. Ltd..
    7. 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.
    8. Víctor M. Montuenga‐Gómez & José M. Ramos‐Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    9. Bernt Bratsberg & Oddbjørn Raaum & Marianne Røed & Pål Schøne, 2010. "Immigration Wage Impacts by Origin," RF Berlin - CReAM Discussion Paper Series 1030, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    10. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 24, pages 41-58.
    11. Simonetta Longhi, 2012. "Job Competition and the Wage Curve," Regional Studies, Taylor & Francis Journals, vol. 46(5), pages 611-620, August.
    12. Reinhold Kosfeld & Christian Dreger, 2018. "Local and spatial cointegration in the wage curve – a spatial panel analysis for german regions," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 38(1), pages 53-75, February.
    13. Baas, Timo & Brücker, Herbert, 2012. "The macroeconomic consequences of migration diversion: Evidence for Germany and the UK," Structural Change and Economic Dynamics, Elsevier, vol. 23(2), pages 180-194.
    14. 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.
    15. Joan Daouli & Michael Demoussis & Nicholas Giannakopoulos & Ioannis Laliotis, 2017. "The wage curve before and during the Greek economic crisis," Empirical Economics, Springer, vol. 52(1), pages 59-77, February.
    16. Chletsos Michael & Roupakias Stelios, 2019. "Do Immigrants Compete with Natives in the Greek Labour Market? Evidence from the Skill-Cell Approach before and during the Great Recession," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-30, April.
    17. Koenig, Felix & Manning, Alan & Petrongolo, Barbara, 2014. "Reservation wages and the wage flexibility puzzle," LSE Research Online Documents on Economics 60613, London School of Economics and Political Science, LSE Library.
    18. David Card, 2009. "Immigration and Inequality," American Economic Review, American Economic Association, vol. 99(2), pages 1-21, May.
    19. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 625-685, Elsevier.
    20. Susanne Prantl & Alexandra Spitz-Oener, 2020. "The Impact of Immigration on Competing Natives' Wages: Evidence from German Reunification," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 79-97, March.

    More about this item

    Keywords

    Migration; wage-setting; labor markets; panel data;
    All these keywords.

    JEL classification:

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

    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:1502. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.