High Unemployment in Germany: Why do Foreigners Suffer Most?

Wido Geis-Thöne

No 90, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: In Germany, immigrant unemployment is not only higher than native unemployment; it also reacts more to changes in the situation on the labor market. Decomposing the gap between native and immigrant unemployment into a baseline and a labor-market situation component, I find that the unemployment rate of immigrants would lie at 5.6 percentage points for zero native unemployment (the baseline component of the gap). An increase in overall unemployment by 1 percentage point leads to a 0.7 percentage points higher increase in immigrant unemployment than in native unemployment (the situation component). The large part of this difference, about 3/4 of the baseline and 4/5 of the situation component, can be explained by differences in the endowments with classical human capital (educational degrees and experience) between immigrants and natives. Also controlling for country-specific human capital, particularly language skills, the situation component becomes insignificant and the baseline effect again decreases by 1/2. Adding controls for social networks, the baseline effect also becomes insignificant. Thus, human capital and social networks can possibly fully explain the difference between native and immigrant unemployment in Germany.

JEL-codes: F22 J24 J61 J64 J71 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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