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Heterogeneous Firms and Imperfect Substitution: The Productivity Effect of Migrants

Anette Haas () and Michael Lucht ()
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Michael Lucht: Institut für Arbeitsmarkt- und Berufsforschung (IAB)

No 2013019, Norface Discussion Paper Series from Norface Research Programme on Migration, Department of Economics, University College London

Abstract: To examine the impact of migrants on the average firm productivity, wages and welfare we construct a general equilibrium model with monopolistic competition a la Melitz (2003) considering heterogeneous firms with different productivity levels and imperfect substitutability between migrants and natives. This gives rise to wage differences between natives and migrants. As a consequence firms with a higher share of migrants realize wage cost advantages. The heterogeneous distribution of migrants in our model might foster regional disparities. In the long run equilibrium it depends on the migrant share, which kind of firms survive in the market. Above a certain migrant share only those firms stay in the market which are highly productive or are able to compensate a lower productivity level by wage cost advantages. By modeling this process, we show that a higher migrant share may explain a higher average productivity in a region. Though the relative wages of natives to migrants increase in the migrant share, in contrast the welfare effects for natives are ambiguous: it might be the case that in a region with a higher migrant share the welfare of a native can be lower compared to a worker in a region of the same size with lower migrant share.

Keywords: immigration; firm heterogeneity; skills; tasks; regional labor markets (search for similar items in EconPapers)
JEL-codes: R23 J15 J24 J61 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-mig and nep-ure
Date: 2013-09
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:nor:wpaper:2013019

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