General equilibrium effects of immigration in Germany: Search and matching approach

Abstract

In this study we develop and calibrate a search and matching model of the German labour market and analyze the impact of recent immigration. Our model has two production sectors (manufacturing and services), two skill groups and two ethnic groups of workers (natives and immigrants). Moreover, we allow for the possibility of self-employment, endogenous price and wage setting and fiscal redistribution policy. We find that search frictions are less important for wages of the low skilled, especially in manufacturing, whereas wages of the high skilled are more sensitive to their outside opportunities. Furthermore, employment chances of immigrant workers are up to four times lower than employment chances of native workers, especially in the high skill segment. Our results show that recent immigration to Germany, including refugees, has a moderate negative effect on the welfare of low skill workers in manufacturing (-0.6%), but all other worker groups are gaining from immigration, with high skill service employees gaining the most (+4.3%). This is because the productivity of high (low) skill workers is increasing (decreasing) and there is a higher demand for services. The overall effect of recent immigration is estimated at +1.6%. Finally, we observe that productive capacities of immigrant workers are underutilized in Germany and a policy implementing equal employment opportunities can generate a welfare gain equal to +0.9% with all worker groups (weakly) gaining due to the redistribution.

Optimal Promotions of Competing Firms in a Frictional Labour Market with Organizational Hierarchies

“…Moreover, it coincides with the return to tenure estimated by Iftikhar and Zaharieva (2018) for Germany. The second set of parameters is summarized in table 3 below: Figure 4 shows the objective function of firm i -J 00 (x i ) -for a fixed market promotion timē…”

Immigration, Social Networks and Occupational Mismatch

“…With this simplification the vector of exogenous parameters used in the model includes {λ N , λ F , δ N , δ F , sv, τ, γ, n, h}. Iftikhar and Zaharieva (2019) analyzed the size of foreign population in Germany over the period 2005-2016. They find that even though the fraction of foreign citizens was below 10% in Germany in this period, the fraction of individuals with immigration background was 18.2% in 2005 and it increased to 19.7% in 2013.…”

Search Channels of Workers and Firms Over the Business Cycle

“…Estimation results of Stops (2016) indicate that the average of the calculated values of λ 0 is around 0.75, while, it is around 1.05 according to the estimation results of Dengler et al (2016). Using German data Iftikhar and Zaharieva (2019) estimate λ 0 to be 0.5832. So the estimate of this study is close to the lower bound of the values documented in the literature.…”

“…Petrongolo and Pissarides (2001)) While, according toStops (2016) (1 − η) ranges from 0.570 to 0.797 for different estimation equations Iftikhar and Zaharieva (2019). estimate 1 − η to be 0.4379.…”