EconPapers    
Economics at your fingertips  
 

General equilibrium effects of immigration in Germany: Search and matching approach

Zainab Iftikhar and Anna Zaharieva

Review of Economic Dynamics, 2019, vol. 31, 245-276

Abstract: In this study we develop and calibrate a search and matching model of the German labour market and analyse the impact of a 25% increase in immigration observed in the period 2012–2016. Our model has two production sectors (tradable manufacturing and non-tradable services), two skill groups and two ethnic groups of workers (natives and immigrants). Moreover, we allow for the possibility of vertical skill mismatch of high skill workers, endogenous price setting in the non-tradable sector and fiscal redistribution policy. We find that immigrant workers are underrepresented in services compared to manufacturing, so there is only a moderate output increase in the production of services in response to immigration. This output increase is insufficient to cover the associated higher demand for services, which generates a higher price in this sector and stimulates job creation. Workers in services gain welfare but there is a negative effect on the real income of workers in manufacturing. Our results show that recent immigration to Germany, including refugees, has a moderate negative effect on the welfare of low skill workers in manufacturing (−1.2%), but all other worker groups are gaining from immigration, with high skill service employees gaining the most (+6.3%). The average effect of recent immigration after we account for changes in the fiscal budget is estimated at +3.0% but there is larger inequality in the post-immigration steady state. (Copyright: Elsevier)

Keywords: Search frictions; Immigration; General; Equilibrium; Redistribution; Welfare (search for similar items in EconPapers)
JEL-codes: J23 J31 J38 J64 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1016/j.red.2018.07.004
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "General equilibrium effects of immigration in Germany: Search and matching approach" (2018) Downloads
Working Paper: General Equilibrium Effects of Immigration in Germany: Search and Matching Approach (2017) Downloads
Working Paper: General equilibrium effects of immigration in Germany: search and matching approach (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:18-221

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2018.07.004

Access Statistics for this article

Review of Economic Dynamics is currently edited by Jonathan Heathcote and Vincenzo Quadrini

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2019-04-20
Handle: RePEc:red:issued:18-221