Problem or Opportunity? Immigration, Job Search, Entrepreneurship and Labor Market Outcomes of Natives in Germany

Zainab Iftikhar () and Anna Zaharieva
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Zainab Iftikhar: University of Bonn & CEPR

No 358, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: In this study we evaluate the effects of low-skilled immigration on small businesses, wages and employment in Germany. We develop a search and matching model with heterogeneous workers, cross-skill matching, and endogenous entry into entrepreneurship. The model is calibrated using German Socio-Economic Panel (SOEP) data. Quantitative analysis shows that low-skilled immigration benefits high-skilled workers while negatively affecting the welfare of low-skilled workers. It leads to the endogenous expansion of immigrant entrepreneurial activities, generating positive spillovers for all demographic groups except native entrepreneurs. Overall, there is a marginal loss to the economy in terms of per worker welfare. This loss is mitigated with increased skilled migration from India. Policies restricting immigrant entrepreneurship relax competition for native small businesses but reduce welfare for all other worker groups. Ethnic segregation of small businesses benefits low-skill native entrepreneurs.

Keywords: Entrepreneurship; small business; self-employment; search frictions; immigration (search for similar items in EconPapers)
JEL-codes: J23 J31 J61 J64 L26 (search for similar items in EconPapers)
Pages: 51
Date: 2025-03
New Economics Papers: this item is included in nep-dge, nep-ent, nep-eur, nep-lab, nep-mig and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:358

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