Abstract

Our project aims at better understanding the relationship between labor market institutions and the impact of immigration on wages and employment by focusing on employment protection as an extreme type of regulation. Many countries (e.g. France and Germany) prohibit and restrict foreigners’ access to the labor market, such as white-collar jobs (lawyers, dentists or doctors), craftsmen and tradesmen professions and to public servant positions (which are still largely closed today to non-EU nationals). This Project aims to contribute to the literature by investigating the interactions between these restrictions and the labor market effects of immigration. Do Are these employment restrictions protect native workers from immigrant competition? How does reducing occupational restrictions for immigrants affect native labor market Outcomes?Germany provides an excellent context to answer these questions as we could exploit two policy reforms that took place in 2004 and 2012 which have lowered entry costs to a set of highly regulated occupations for immigrants of certain nationalities, creating exogenous variations by nationality and occupations. Moreover, the quality of the German administrative data offers the possibility to follow the universe of natives and immigrants (subject to affiliated with the the social security contributionsystem) across locations and time, making it possible to control for unobservable individual characteristics that is cruicial for correct measurement of the effects of these reforms. Furthmore, the panel dimension of the data is fundamental to study the overall impact of these occupational restrictions on the labor market outcomes of incumbent and unemployed individuals in the short- and long-run. For instance, removing occupational barriers could affect the reallocation of natives and immigrants across occupations without any wage response in the treated occupations after some years. Some workers could also respond at the extensive margin by moving into unemployment or inactivity. The German data will allow us to cover various adjustment margins through which occupational restrictions could affect the evolution of wages and employment.