How do regional labor markets adjust to immigration?

Auteurs

• Sebastian Braun-Lüdicke

Paramètres

• Affaires et économie

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This analysis utilizes two decades of historical data to examine how West Germany's regional labor markets responded to the significant influx of eight million German expellees post-World War II. The inflow was unevenly distributed across two regions, prompting the development of a dynamic two-region search and matching model of unemployment that aligns closely with historical data on regional unemployment differentials and migration rates. Both metrics saw a dramatic increase following the influx, with a gradual decline over the next decade. Despite the extensive and enduring effects of the expellee inflow, native workers faced only a modest reduction in expected lifetime labor income of 1.38%, while per-period losses were up to four times greater. These income losses varied based on the initial location and labor market status of native workers. Counterfactual analyses reveal that economic policy interventions can mitigate native income losses and stabilize regional labor markets. For instance, distributing the influx more evenly over time proves effective, and smaller immigration inflows—comparable to the current refugee situation in Germany—also significantly lessen native income losses, although they only slightly shorten the adjustment period in labor markets.

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• Année de publication: 2016