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rjas (2003) and Ottaviano and
Peri (2006), we employ a nested production function which assumes that
migrant and native workers within the same experience and education group
are imperfect substitutes. We moreover consider the imperfect adjustment
of capital stocks. Since it is likely that the bargaining power of workers and
employers varies in the di®erent segments of the labor market, we allow the
wage-setting curve to di®er across education and experience groups.
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1 9 6 0 1 9 6 5 1 9 7 0 1 9 7 5 1 9 8 0 1 9 8 5 1 9 9 0 1 9 9 5 2 0 0 0 2 0 0 5
n e t m ig ra tio n ra te p e r th o u s a n d
G e rm a n y
U S
E U -1 5
S o u rc e : W o rld B a n k (2 0 0 7 ).
Figure 1: Net migration rate per thousand, 1960-2005
2
We apply this framework empirically to Germany, which is the third
most popular destination for migrants in the world after the US and Russia
(Freeman, 2006). With the fall of the Berlin wall, the net immigration rate
climbed in Western Germany from about zero at the beginning of the 1980s
to about 6 per thousand at the beginning of the 1990s, compared to 3 per
thousand in the ¯fteen member states of the then European Union (EU-
15) and 4 per thousand in the US (World Bank, 2007). However, since the
beginning of this millennium, the net immigration rate has dropped to less
https://www.51lunwen.org/StudentPapers.htmlthan 3 per thousand in the course of Germany's economic downturn (Figure
1).
Our empirical analysis is based on a 2 percent random sample drawn
from the German social security records (IABS) for the period from 1980 to
2004. This data set allows us to identify the elasticities of the wage-setting
curve for education and experience groups and to estimate the elasticities of
substitution between di®erent types of labor in Western Germany.
We ¯nd an average elasticity of the wage-setting curve of -0.15 at the
national level, which is somewhat higher than the elasticities found in theregional wage curve literature in other OECD countries (see Blanch°owerand Oswald, 1994a; Card, 1995; Nijkamp and Poot, 2005), but substantiallyhigher than that found at the regional level in Germany (Baltagi, Blien,and Wolf, 2007). However, the elasticities of the wage-setting curves °uc-tuate considerably across skill groups and experience groups. The elasticitybetween wages and unemployment is particularly large for highly educatedworkers and workers with little work experience.
We simulate the immigration impact on the German labor market in three
scenarios: The ¯rst scenario analyzes the e®ects of a 1 percent immigrationat the given skill and age structure of the foreign and native labor force.The second scenario examines the impact of the actual labor immigration
during the total 1980-2004 period and the ¯nal scenario assesses the e®ectsof the main immigration shock on the German economy during the 1984-1993subperiod.
At the given skill structure of the foreign workforce, a 1 percent increasein labor supply through the immigration of foreigners increases the unem-ployment rate by less than 0.1 percentage points in the short run, while itremains almost stable in the long run. Average wages decline by 0.1 per-cent in the short run, but remain una®ected after the adjustment of capitalstocks. While native workers tend to bene&m