Immigration and Wage Dynamics in Germany

35 Pages Posted: 23 Jan 2020

See all articles by Sabine Klinger

Sabine Klinger

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Anvar Musayev

International Monetary Fund (IMF)

Jean-Marc Natal

Swiss National Bank

Enzo Weber

University of Regensburg; Government of the Federal Republic of Germany - Institute for Employment Research (IAB); Osteuropa-Institut (OEI)

Date Written: December 2019

Abstract

German wages have not increased very rapidly in the last decade despite strong employment growth and a 5 percentage point decline in the unemployment rate. Our analysis shows that a large part of the decline in unemployment was structural. Micro-founded Phillips curves fit the German data rather well and suggest that relatively low wage growth can be largely attributed to low inflation expectations and low productivity growth. There is no evidence - from either aggregate or micro-level administrative data - that large immigration flows since 2012 have had dampening effects on aggregate wage growth, as complementarity effects offset composition and competition effects.

Keywords: Labor market reforms, Labor market characteristics, Labor costs, Labor supply, Labor productivity, wage growth, Phillips curve, immigration, micro-data, panel regression, Germany, WP, wage inflation, NAIRU, wage of worker

JEL Classification: C23, E31, J30, J60, E2, E01, J3, D4, O4

Suggested Citation

Klinger, Sabine and Musayev, Anvar and Natal, Jean-Marc and Weber, Enzo, Immigration and Wage Dynamics in Germany (December 2019). IMF Working Paper No. 19/301, Available at SSRN: https://ssrn.com/abstract=3524320

Sabine Klinger (Contact Author)

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Anvar Musayev

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jean-Marc Natal

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland

Enzo Weber

University of Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Osteuropa-Institut (OEI) ( email )

Landshuter Str. 4
Regensburg, 93047
Germany

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