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Restrictive immigration policy in Germany: pains and gains foregone?

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Felbermayr, Gabriel; Geis, Wido; Kohler, Wilhelm

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Abstract Many European countries restrict immigration from new EU member countries. The rationale is to avoid adverse wage and employment effects. We quantify these effects for Germany. Following Borjas (in Q J Econ CXVIII(4):1335–1374, 2003), we estimate a structural model of labor demand, based on elasticities of substitution between workers with different experience levels and education. We allow for unemployment which we model in a price-wage-setting framework. Simulating a counterfactual scenario without restrictions for migration from new EU members countries in Germany, we find moderate negative wage and employment effects for incumbent foreigners, but positive effects for natives. Our results indicate that for the native German population as a whole the immigration restrictions are not welfare enhancing.
Keywords unemployment; EU expansion; wage; labor demand; labor migration; Federal Republic of Germany; migration
Classification Labor Market Research; Economics
Free Keywords Labor demand; Wages; Unemployment; EU enlargement; JEL classification: F22; F15; J23
Document language English
Publication Year 2010
Page/Pages p. 1-21
Journal Review of World Economics, 146 (2010) 1
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)