WORKING PAPER 08-4
Herbert Brücker and Elke J. Jahn
Migration and the Wage-Settings Curve: Reassessing the Labor Market Effects of Migration
Department of
EconomicsISBN 9788778822895 (print)
ISBN 9788778822901 (online)
Migration and the Wage-Setting Curve:
Reassessing the Labor Market E®ects of
Migration
Herbert BrÄucker¤ and Elke J. Jahnyz
May 2008
AbstractIn this paper we examine the labor market e®ects of migration in
代写留学生论文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 e®ects of migration simultaneously in a gen-
eral equilibrium framework. Using administrative micro data we ¯nd
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 e®ects 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
bene¯t from increased wages and lower unemployment, foreign work-
ers are adversely a®ected.
Keywords: Migration, wage-setting curve, labor markets, panel data.
JEL code: F22, J31, J61.
¤University of Bamberg, IAB NÄurnberg and IZA Bonn, Herbert.Bruecker@iab.de.
yºArhus School of Business, IAB NÄurnberg and IZA Bonn, elja@asb.dk.
zThe authors are grateful to Thomas BÄuttner, who imputed the wage data for the
empirical part of this paper, and to Andreas Hauptmann, who programmed the code
of the simulation model. Uwe Blien, Gabriel Felbermayr, Wilhelm Kohler, Michael E.
Landesmann, Philipp J.H. SchrÄoder, Alessandra Venturini and the participants of the
annual SOLE meeting in New York, May 9-10, 2008, the Thyssen-Workshop on migration
and integration at the University of TÄubingen, December 7-8, 2007, provided valuable
comments. Herbert BrÄucker gratefully acknowledges ¯nancial support from the European
Commission granted to the "Transnationality of Migrants" project. The usual disclaimer
applies.
1
1 Introduction
High and increasing immigration rates in the US and Europe have fanned
fears that migrants reduce wages and limit employment opportunities of the
native labor force. Concerns that immigration increases unemployment are
particularly widespread in the continental European countries, where unem-
ployment is persistently high. In this paper we apply a wage-setting curve
approach to analyze the labor market e®ects of immigration. The wage-
setting curve relies on the assumption that wages respond to changes in
the unemployment rate, albeit imperfectly. This allows us to consider in-
stitutional and other labor market rigidities, which are particularly relevant
in the European context. In contrast to the overwhelming majority of the
empirical literature, which addresses the impact of migration on wages and
(un-)employment separately, we analyze the wage and employment e®ects of
migration simultaneously in a general equilibrium framework.
Following the seminal contributions of Bo
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