The Labor Market Impact of Immigration in Western Germany in the 1990’s
Gianmarco I. P. Ottaviano
We adopt a general equilibrium approach in order to measure the effects of recent immigration on the Western German labor market, looking at both wage and employment effects. Using the Regional File of the IAB Employment Subsample for the period 1987-2001, we find that the substantial immigration of the 1990’s had no adverse effects on native wages and employment levels. It had instead adverse employment and wage effects on previous waves of immigrants. This stems from the fact that, after controlling for education and experience levels, native and migrant workers appear to be imperfect substitutes whereas new and old immigrants exhibit perfect substitutability. Our analysis suggests that if the German labor market were as ‘flexible’ as the UK labor market, it would be more efficient in dealing with the effects of immigration.
In this article we measure the effects of recent immigration on the Western German labor market looking at both wage and employment effects. Refining administrative data for the period 1987-2001 to account for ethnic German immigrants and immigrants from Eastern Germany, we find that the substantial immigration of the 1990’s had very little adverse effects on native wages and on their employment levels. Instead, it had a sizable adverse employment effect as well as a small adverse wage effect on previous waves of immigrants. These asymmetric results are partly driven by a higher degree of substitution between old and new immigrants in the labor market. In a simple calculation we show that the largest aggregate effect of new immigration on natives and old immigrants comes from the increased costs of unemployment benefits to old immigrants. Those costs could be eliminated in a world of wage flexibility and no unemployment insurance in which immigration would not have any negative employment effect but only moderate wage effects.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.