Working Paper #2012-055
The impact of Medium-Skilled immigration: A general equilibrium approach
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-skilled). We assume price-setting behaviour in both
manufacturing and services sectors. 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 service jobs whereas 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 lowand high-skilled wages increase
relative to the medium-skilled. The model is calibrated using German
data. The key findings are: (i) a perfectly balanced migration has a
neutral impact on the receiving economy due to international capital
flows; (ii) immigration of medium-skilled labour together with some
high-skilled labour lowers the low-skilled unemployment rate and has a
positive effect on output per capita; (iii) migration of only
medium-skilled labour has a neutral GDP per capita effect.
- Keywords
-
- Medium-Skilled Migration
- Wage and Price Setting
- Specific Factors Model
- Unemployment
- Over-qualification
- Wage Polarization JEL Classification F22
- J51
- J52
- J61
- J64
Cite this as
APA 7th ed.Muysken, J., Vallizadeh, E., & Ziesemer, T. (2012). The impact of Medium-Skilled immigration: A general equilibrium approach (UNU-MERIT Working Paper No. 2012-055). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=4779