Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus
Migration and the Wage-Settings Curve: Reassessing the Labor Market Effects of Migration.
() and Elke J. Jahn
Abstract: In this paper we examine the labor market effects of
migration in Germany on basis of a wage-setting curve. The wage-setting
curve relies on the assumption that wages respond to a change in the un-
employment rate, albeit imperfectly. This allows one to derive the wage and
employment effects of migration simultaneously in a gen- eral equilibrium
framework. Using administrative micro data we find that the elasticity of
the wage-setting curve is particularly high for young workers and workers
with an university degree, while it is low for older workers and workers
with a vocational degree. The wage and employment effects of migration are
moderate: a 1 percent increase in the German labor force through
immigration increases the aggregate unemployment rate by less than 0.1
percentage points and reduces average wages by 0.1 percent in the short
run. While native workers benefit from increased wages and lower
unemployment, foreign work- ers are adversely affected.
Keywords: Migration; wage-setting curve; labor markets; panel data; (follow links to similar papers)
JEL-Codes: F22; J31; J61; (follow links to similar papers)
59 pages, May 1, 2008
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