Migration and the wage-setting curve

Abstract

"In this paper we examine the labor market effects of migration in Germany on basis of a wage-setting curve. The wage-setting curve relies on the assumption that wages respond to a change in the unemployment rate, albeit imperfectly. This allows one to derive the wage and employment effects of migration simultaneously in a general equilibrium framework. Using administrative micro data we find 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 effects 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 benefit from increased wages and lower unemployment, foreign workers are adversely affected." (Author's abstract, IAB-Doku) ((en))

Cite article

Brücker, H. & Jahn, E. (2008): Migration and the wage-setting curve. Reassessing the labor market effects of migration. (Aarhus School of Business. Working paper 2008-04), Aarhus, 49 p.