The Impact of Immigration on Competing Natives' Wages: Evidence from German Reunification

Susanne Prantl and Alexandra Spitz-Oener
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Susanne Prantl: University of Cologne
Alexandra Spitz-Oener: Humboldt-University Berlin, IAB, IZA

The Review of Economics and Statistics, 2020, vol. 102, issue 1, 79-97

Abstract: After the fall of the Berlin Wall on November 9, 1989, and the collapse of the German Democratic Republic, a sudden, unexpected, and massive influx of East German migrants hit the entire West German labor market. The context is well suited for investigating whether immigration influences natives' wages and how the effects depend on product and labor market conditions. We propose direct measures of potential migration with exogenous variation, compare migrants to natives with similar capabilities, and segment the labor market along predetermined margins. We find that immigration can have negative effects on the wages of natives. These effects surface when product and labor markets are competitive but not under regulations that restrict the entry of firms and provide workers with a strong influence on firms' decision making.

Date: 2020
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