Welfare Effects of Immigration in a Dual Labor Market

Fuest, Clemens; Thum, Marcel P.

doi:10.2139/ssrn.269473

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Welfare Effects of Immigration in a Dual Labor Market

CESifo Working Paper Series No. 215

15 Pages Posted: 17 Jun 2001

See all articles by Clemens Fuest

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Marcel P. Thum

Dresden University of Technology - Faculty of Economics and Business Management; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; Institute for Corruption Studies

Date Written: December 1999

Abstract

The paper analyses the welfare effects of immigration when some sectors of the economy are characterized by wage bargaining between unions and employers. We show that immigration is unambiguously beneficial if the wage elasticity of labor demand in the competitive sectors is smaller than in the unionised sectors. In the opposite case, the welfare effect of immigration is ambiguous; little immigration then reduces the native population?s welfare, whereas large scale immigration tends to enhance welfare.

Keywords: Immigration policy, trade unions, welfare

JEL Classification: J5, J61

Suggested Citation: Suggested Citation

Fuest, Clemens and Thum, Marcel, Welfare Effects of Immigration in a Dual Labor Market (December 1999). CESifo Working Paper Series No. 215, Available at SSRN: https://ssrn.com/abstract=269473 or http://dx.doi.org/10.2139/ssrn.269473