Migration and the Wage Curve: A Structural Approach to Measure the Wage and Employment Effects of Migration

49 Pages Posted: 3 Nov 2008

See all articles by Herbert Brücker

Herbert Brücker

German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Elke J. Jahn

Institute for Employment Research (IAB); University of Bayreuth; IZA Institute of Labor Economics

Abstract

Based on a wage curve approach we examine the labor market effects of migration in Germany. The wage 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. For the empirical analysis we employ the IABS, a two percent sample of the German labor force. We find that the elasticity of the wage curve is particularly high for young workers and workers with a 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 less 0.1 percent. While native workers benefit from increased wages and lower unemployment, foreign workers are adversely affected.

Keywords: migration, wage curve, labor demand, panel data

JEL Classification: F22, J31, J61

Suggested Citation

Brücker, Herbert and Jahn, Elke J., Migration and the Wage Curve: A Structural Approach to Measure the Wage and Employment Effects of Migration. IZA Discussion Paper No. 3423, Available at SSRN: https://ssrn.com/abstract=1294546 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Herbert Brücker (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Elke J. Jahn

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

University of Bayreuth ( email )

Bayreuth, 95447
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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