Migration as an Adjustment Mechanism in the Crisis? A Comparison of Europe and the United States

36 Pages Posted: 1 Feb 2014

See all articles by Julia Jauer

Julia Jauer

Organization for Economic Co-Operation and Development (OECD)

Thomas Liebig

Organization for Economic Co-Operation and Development (OECD)

John P. Martin

Organization for Economic Co-Operation and Development (OECD) - Directorate for Employment, Labour and Social Affairs (ELS); IZA Institute of Labor Economics; Sciences Po

Patrick A. Puhani

Leibniz Universität Hannover; University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research; IZA Institute of Labor Economics; Université Paris II - Panthéon-Assas

Abstract

The question of whether migration can be an equilibrating force in the labour market is an important criterion for an optimal currency area. It is of particular interest currently in the context of high and rising levels of labour market disparities, in particular within the Eurozone where there is no exchange-rate mechanism available to play this role. We shed some new light on this question by comparing pre- and post-crisis migration movements at the regional level in both Europe and the United States, and their association with asymmetric labour market shocks. We find that recent migration flows have reacted quite significantly to the EU enlargements in 2004 and 2007 and to changes in labour market conditions, particularly in Europe.Indeed, in contrast to the pre-crisis situation and the findings of previous empirical studies, there is tentative evidence that the migration response to the crisis has been considerable in Europe, in contrast to the United States where the crisis and subsequent sluggish recovery were not accompanied by greater interregional labour mobility in reaction to labour market shocks. Our estimates suggest that, if all measured population changes in Europe were due to migration for employment purposes – i.e. an upper-bound estimate – up to about a quarter of the asymmetric labour market shock would be absorbed by migration within a year. However, in the Eurozone the reaction mainly stems from migration of third-country nationals. Even within the group of Eurozone nationals, a significant part of the free mobility stems from immigrants from third countries who have taken on the nationality of their Eurozone host country.

Keywords: free mobility, migration, economic crisis, labour market adjustment, Eurozone, Europe, United States

JEL Classification: F15, F16, F22, J61

Suggested Citation

Jauer, Julia and Liebig, Thomas and Martin, John P. and Puhani, Patrick A., Migration as an Adjustment Mechanism in the Crisis? A Comparison of Europe and the United States. IZA Discussion Paper No. 7921. Available at SSRN: https://ssrn.com/abstract=2389289

Julia Jauer (Contact Author)

Organization for Economic Co-Operation and Development (OECD)

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Thomas Liebig

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

John P. Martin

Organization for Economic Co-Operation and Development (OECD) - Directorate for Employment, Labour and Social Affairs (ELS) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Sciences Po ( email )

rue saint guillaume
Paris
France

Patrick A. Puhani

Leibniz Universität Hannover ( email )

Institut für Arbeitsökonomik
Koenigsworther Platz 1
30167 Hannover, DE 30167
Germany

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research ( email )

Dufourstr. 48
St. Gallen, 9000
Switzerland
+41 71 224 2341 (Phone)
+41 71 224 2298 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Université Paris II - Panthéon-Assas

12 place du Pantheon
Paris cedex 06, 75231
France

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