The impact of medium-skilled immigration: a general equilibrium approach

Vallizadeh, Ehsan and Joan, Muysken and Thomas, Ziesemer (2012): The impact of medium-skilled immigration: a general equilibrium approach.

Abstract

This paper analyses the impact of the skill composition of migration flows on the host country's labour market in a specific-factors-two-sector model with heterogeneous labour (low-, medium-, and high-skilled). We assume price-setting behaviour in both manufacturing and services sectors. The low- and medium-skilled labour markets are characterized by frictions due to wage bargaining. Moreover, we assume bumping down of unemployed medium-skilled workers into low-skilled service jobs whereas endogenous benefits create an interdependency between the two bargaining processes. Particular attention is paid to medium-skilled migration which enables us to augment the literature by replicating important stylized facts regarding medium skills, such as i) the interaction between immigration, low-skilled unemployment and medium-skilled over-qualification, ii) the polarization effect where both low- and high-skilled wages increase relative to the medium-skilled. The model is calibrated using German data. The key findings are: (i) a perfectly balanced migration has a neutral impact on the receiving economy due to international capital flows; (ii) immigration of medium-skilled labour together with some high-skilled labour lowers the low-skilled unemployment rate and has a positive effect on output per capita; (iii) migration of only medium-skilled labour has a neutral GDP per capita effect

• Item Type: MPRA Paper
• Language: English
• Keywords: Medium-Skilled Migration \and Wage and Price Setting \and Specific Factors Model, Unemployment, Over-qualification, Wage Polarization
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J51 - Trade Unions: Objectives, Structure, and Effects; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J52 - Dispute Resolution: Strikes, Arbitration, and Mediation ; Collective Bargaining; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search

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