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Immigrants, labor market dynamics and adjustment to shocks in the Euro Area

Gaetano Basso (), Francesco D'Amuri () and Giovanni Peri ()

No 1195, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We analyze the role of labor mobility in cushioning labor demand shocks in the Euro Area. We find that foreign-born workers’ mobility is strongly cyclical, while this is not the case for natives. Foreigners’ higher population to employment elasticity reduces the variation in overall employment rates over the business cycle: thanks to foreigners, the impact of a one standard deviation change in employment on employment rates decreases by 6 per cent at country level and by 7 per cent at regional level. In addition, we compare Euro Area mobility with that of another currency union, the US. We find that the population to employment elasticity estimated for foreign-born persons is similar in the Euro Area and the US, while Euro Area natives are definitely less mobile across countries than US natives are across states in response to labor demand shocks. This latter result confirms that in the Euro Area there is room for improving country-specific shock absorption through higher labor mobility. It also suggests that immigration has helped labor market adjustments.

Keywords: business cycles; international migration; mobility (search for similar items in EconPapers)
JEL-codes: E32 F22 F66 J6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-lab, nep-mac, nep-mig and nep-ure
Date: 2018-11
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Working Paper: Immigrants, Labor Market Dynamics and Adjustment to Shocks in the Euro Area (2018) Downloads
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