Migration, Unemployment, and Over-qualification: A Specific-Factors Model Approach

Joan Muysken (), Ehsan Vallizadeh and Thomas Ziesemer ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyses the impact of the skill composition of migration flows on the host country's labour market in a specific-factors-two-sector model with heterogeneous labour (low, medium, and high skill) and price- and wage-setting behaviour. The low- and medium-skilled labour markets are characterized by frictions due to wage bargaining. Moreover, we assume bumping down of unemployed medium-skilled workers into low-skilled labour supply. Endogenous benefits create an interdependency between the two bargaining processes. Particular attention is paid to medium-skilled migration which enables us to augment the literature by replicating important stylized facts regarding medium skills, such as i) the interaction between immigration, low-skilled unemployment and medium-skilled over-qualification, ii) the polarization effect where both low- and high-skilled wages increase relative to the medium-skilled. The model is calibrated using German data. The key findings are: (i) a migration-induced supply shock of medium-skilled workers decreases the low-skilled unemployment rate because of the endogenous benefits; (ii) immigration of medium-skilled labour together with some high-skilled labour has a positive effect on output per capita; (iii) migration of only medium-skilled labour has a neutral impact on GDP per capita.

Keywords: Medium-Skilled Migration; Wage and Price Setting; Specific Factors Model; Unemployment; Over-qualification; Wage Polarization (search for similar items in EconPapers)
JEL-codes: F22 J51 J52 J61 J64 (search for similar items in EconPapers)
Date: 2012-12-03
New Economics Papers: this item is included in nep-lab and nep-mig
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https://mpra.ub.uni-muenchen.de/43057/3/MPRA_paper_43057.pdf original version (application/pdf)

Related works:
Journal Article: Migration, Unemployment, and Skill Downgrading (2015)
Working Paper: Migration, Unemployment, and Over-qualification: A Specific Factors-Model Approach (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43057

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