Migration,Unemployment, and Skill Downgrading |
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| Authors: | Joan Muysken Ehsan Vallizadeh Thomas Ziesemer |
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| Affiliation: | 1. Maastricht University, NL‐6200 MD Maastricht, The Netherlands;2. Institute for Employment Research (IAB), DE‐90478 Nuremberg, GermanyAlso Maastricht University.;3. Maastricht University, NL‐6200 MD Maastricht, The NetherlandsAlso UNU‐MERIT. |
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| Abstract: | In this paper, we analyze the labor market impacts of immigration under flexible and rigid labor market regimes. A general equilibrium framework is developed, accounting for skill heterogeneity and labor market frictions, where unemployed medium‐skilled manufacturing workers are downgraded into low‐skilled service jobs, while low‐skilled service workers might end up unemployed. The analytical analysis shows that medium‐skill immigration decreases low‐skilled unemployment under the flexible regime, indicating a complementarity effect, while the rigid regime induces a substitution effect, leading to low‐skilled unemployment. Moreover, it leads to wage polarization. In a numerical analysis, the economic effects of different migration scenarios are quantified. |
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| Keywords: | Medium‐skilled migration skill downgrading specific factors model unemployment wage and price setting F22 J51 J52 J61 J64 |
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