Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 12-2008: Should Native Workers Welcome Foreign Workers in Upturns?

Nikolaj Malchow-Møller and Jan Rose Skaksen
Additional contact information
Nikolaj Malchow-Møller: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Jan Rose Skaksen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

Abstract: In this paper, we show that the welfare implications of immigration which takes place in upturns, and may be partly reversed in downturns, are very different from the implications of immigration usually found in static models. Abstracting from any gains to capital owners and native workers due to complementarities, we find that (especially temporary) immigration may still benefit native workers in a European type of labour market where minimum wages may bind in downturns. However, in the presence of hiring costs, these effects may be reversed. Thus, promoting temporary immigration schemes may lead to adverse consequences if they also increase the costs of hiring foreign labour.

Keywords: na

JEL-codes: E24; J61

33 pages, January 1, 2008

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