Immigrants, Labor Market Dynamics and Adjustment to Shocks in the Euro Area

48 Pages Posted: 1 Oct 2018

See all articles by Gaetano Basso

Gaetano Basso

Bank of Italy; Fondazione Rodolfo Debenedetti

Francesco D’Amuri

Bank of Italy; University of Essex - Institute for Social and Economic Research (ISER)

Giovanni Peri

University of California, Davis - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2018

Abstract

We analyze the role of labor mobility in cushioning labor demand shocks in the Euro Area. We find that foreign born workers’ mobility is strongly cyclical, while this is not the case for natives. Foreigners’ higher population to employment elasticity reduces the variation of overall employment rates over the business cycle: thanks to them, the impact of a one standard deviation change in employment on employment rates decreases by 6 per cent at the country level and by 7 per cent at the regional level. Additionally, we compare Euro Area mobility to that of another currency union, the US. We find that the population to employment elasticity estimated for foreign-born persons is similar in the Euro Area and the US, while EA natives are definitely less mobile across countries than US natives are across states in response to labor demand shocks. This last result confirms that in the Euro Area there is room for improving country specific shocks absorption through higher labor mobility. It also suggests that immigration helped labor market adjustments.

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Suggested Citation

Basso, Gaetano and D’Amuri, Francesco and Peri, Giovanni, Immigrants, Labor Market Dynamics and Adjustment to Shocks in the Euro Area (September 2018). NBER Working Paper No. w25091. Available at SSRN: https://ssrn.com/abstract=3258188

Gaetano Basso (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Fondazione Rodolfo Debenedetti ( email )

Via Roentgen 1,
Room 5.C1-11
Milan, Milano 20136
Italy

Francesco D’Amuri

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Giovanni Peri

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)

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