The impact of Medium-Skilled immigration: A general equilibrium approach

Muysken, Joan, Vallizadeh, Ehsan and Ziesemer, Thomas (2012). The impact of Medium-Skilled immigration: A general equilibrium approach. UNU-MERIT.

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  • Author Muysken, Joan
    Vallizadeh, Ehsan
    Ziesemer, Thomas
    Title The impact of Medium-Skilled immigration: A general equilibrium approach
    Publication Date 2012
    Publisher UNU-MERIT
    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-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.
    Keyword Medium-skilled migration
    Wages
    Specific factors model
    Unemployment
    Over-qualification
    Wages
    JEL F22
    J51
    J52
    J61
    J64
    Copyright Holder UNU-MERIT
    Copyright Year 2012
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    Created: Wed, 11 Dec 2013, 17:06:30 JST