Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives

43 Pages Posted: 15 Oct 2009

See all articles by Christian Dustmann

Christian Dustmann

University College London; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Albrecht Glitz

Universitat Pompeu Fabra; Barcelona School of Economics; IPEG

Thorsten Vogel

Humboldt University of Berlin

Abstract

In this paper, we analyse differences in the cyclical pattern of employment and wages of immigrants and natives for two large immigrant receiving countries, Germany and the UK. We show that, despite large differences in their immigrant populations, there are similar and significant differences in cyclical responses between immigrants and natives in both countries, even conditional on education, age, and location. We decompose changes in outcomes into a secular trend and a business cycle component. We find significantly larger unemployment responses to economic shocks for low-skilled workers relative to high-skilled workers and for immigrants relative to natives within the same skill group. There is little evidence for differential wage responses to economic shocks. We offer three explanations for these findings: An equilibrium search model, where immigrants experience higher job separation rates, a model of dual labour markets, and differences in the complementarity of immigrants and natives to capital.

Keywords: immigration, unemployment, business cycle

JEL Classification: E32, F22, J31

Suggested Citation

Dustmann, Christian and Glitz, Albrecht and Vogel, Thorsten, Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives. IZA Discussion Paper No. 4432, Available at SSRN: https://ssrn.com/abstract=1489255 or http://dx.doi.org/10.2139/ssrn.1489255

Christian Dustmann (Contact Author)

University College London ( email )

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Institute for Fiscal Studies (IFS)

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Centre for Economic Policy Research (CEPR)

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Albrecht Glitz

Universitat Pompeu Fabra ( email )

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Spain

Barcelona School of Economics ( email )

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IPEG ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Thorsten Vogel

Humboldt University of Berlin

Unter den Linden 6
AK 10099
Germany

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