Working Paper: CEPR ID: DP727
Authors: Anette Gehrig; Christoph M. Schmidt; Klaus F. Zimmermann
Abstract: Standard economic reasoning based on competitive labour markets suggests that migrant inflow will unambiguously lead to allocative gains for the native population of a host country. Even abstracting from the costs of integration, however, this result is not robust when important labour market imperfections are considered. Much of the migration literature focuses on the determination of the size of the immigration flow given a fixed minimum wage and the level of unemployment in the destination area. By contrast, this paper concentrates on the mechanism of wage determination in the receiving country. The model depicts a situation where one large monopoly union acts on behalf of the whole workforce. Depending on the arguments of the union objective function and on whether labour is heterogeneous, an optimal size of immigration may exist. These considerations could form the basis for welfare-improving government policies.
Keywords: migration; unions; heterogeneous labour; fiscal migration policy
JEL Codes: H30; J51; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Immigration (F22) | Wage Adjustments (J31) |
| Immigration (F22) | Employment Levels (J23) |
| Government Policies (H59) | Immigration (F22) |
| Immigration (F22) | Allocative Gains (D61) |
| Immigration (F22) | Wage Determination (J31) |
| Government Regulation (L51) | Economic Outcomes (P47) |