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

58 Pages Posted: 31 Jul 2019

See all articles by Gaetano Basso

Gaetano Basso

Bank of Italy

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

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Date Written: November 6, 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 in overall employment rates over the business cycle: thanks to foreigners, the impact of a one standard deviation change in employment on employment rates decreases by 6 per cent at country level and by 7 per cent at regional level. In addition, we compare Euro Area mobility with 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 Euro Area natives are definitely less mobile across countries than US natives are across states in response to labor demand shocks. This latter result confirms that in the Euro Area there is room for improving country-specific shock absorption through higher labor mobility. It also suggests that immigration has helped labor market adjustments.

Keywords: business cycles, international migration, mobility

JEL Classification: E32, F22, F66, J6

Suggested Citation

Basso, Gaetano and D’Amuri, Francesco and Peri, Giovanni, Immigrants, Labor Market Dynamics and Adjustment to Shocks in the Euro Area (November 6, 2018). Bank of Italy Temi di Discussione (Working Paper) No. 1195, Available at SSRN: https://ssrn.com/abstract=3429123 or http://dx.doi.org/10.2139/ssrn.3429123

Gaetano Basso (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
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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