مهاجرت و بازار کار ناقص : نظریه و شواهد بین کشوری از دانمارک، آلمان و انگلستان

We investigate the labor market effects of immigration in Denmark, Germany and the UK, three countries which are characterized by considerable differences in labor market institutions and welfare states. Institutions such as collective bargaining, minimum wages, employment protection and unemployment benefits affect the way in which wages respond to labor supply shocks, and, hence, the labor market effects of immigration. We employ a wage-setting approach which assumes that wages decline with the unemployment rate, albeit imperfectly. We find that the wage and employment effects of immigration depend on wage flexibility and the composition of the labor supply shock. In Germany immigration involves only moderate wage, but large unemployment effects, since immigrants are concentrated in labor market segments with low wage flexibility. The reverse is true for the UK and Denmark.

Concerns that immigrants take jobs away from natives and reduce their wages are widespread in most European countries. The current financial and economic crisis has further fueled these fears and raised sentiments against immigration. The impacts of immigration on labor markets are also subject of long-standing controversies in the academic literature. While a substantial number of studies, mainly coming from the US and Europe, finds no discernible effects on natives' wages and employment opportunities (Card, 1990, Card, 2001, Card, 2005, Dustmann et al., 2005 and Pischke and Velling, 1997),1Borjas et al., 1996 and Borjas et al., 1997, Borjas (2003) and Aydemir and Borjas (2007) provide evidence that the impact of immigration on wages and unemployment may be substantial and argue that large parts of the literature systematically tend to underestimate the labor market effects of immigration. These controversial findings can be traced back to differences in the theoretical frameworks, the specification of empirical models and different identification strategies. In this paper we contribute to this literature by taking a fresh look at the effects of immigration on employment and wages using a theoretical and empirical framework which considers imperfect labor markets. Such labor markets are characterized by the presence of labor market institutions, that is systems of laws, bargaining rules, unemployment benefits and labor market programs, that shape the behavior of workers and employers. These institutions differ considerably across countries. We therefore apply a cross-country approach to analyze whether, and to what extent, the labor market effects of immigration vary between countries depending on their institutional settings. Based on a theoretical framework which assumes that wages adjust only imperfectly to labor supply shocks, we use micro data from Denmark, Germany and the UK to estimate the wage and employment effects of immigration in those countries. All three countries have seen a substantial influx of migrants during the last two decades. From 1990 to 2010, cumulative net migration amounted to 8.6% of the population in Germany, 4.3% in Denmark and 4.1% in the UK (World Bank, 2013). While migration to Germany surged following the fall of the Iron Curtain, net migration to Denmark and the UK has also accelerated substantially since the turn of the century, partly as a consequence of the European Union's Eastern enlargement. In the course of the financial and economic crisis, net migration figures have soared in Germany, but declined in Denmark and the UK relative to the 2008 level. The institutions of the labor market and the welfare state of these three countries are different, as Table 1 illustrates. The so-called Danish ‘flexicurity’ system features relatively weak employment protection and a high rate of hirings and firings, but high transfers to unemployed households (Anderson and Svarer, 2007). Moreover, industrial relations are characterized by a high coverage of collective bargaining agreements and union membership density in Denmark. Competition in national product markets as well as exposure to international competition is high, suggesting that rents at the firm level are rather low. Finally, taxes are high and progressive in Denmark, which in turn affects wage-setting for different groups in the labor market in different ways (Lockwood et al., 2000).Germany is the archetypal example of a “continental” European welfare state, where employment protection is strict and welfare benefits are relatively high. The level of employment protection is significantly higher than in Denmark and the UK, while unemployment benefits are below those in Denmark, but above those of the UK. Union density is relatively low, but Germany is still characterized by an intermediate coverage of collective bargaining agreements. Moreover, many employers not officially participating in collective bargaining informally apply the contents of collective agreements in their firms. National product market competition is more strongly regulated than in Denmark or the UK, but exposure to international competition is, for a country of this size, high. Finally, the United Kingdom is characterized by weak employment protection and, relative to the other two countries, low unemployment benefits. The UK typically has a low coverage of collective bargaining agreements and an intermediate level of union membership. In contrast to the other two countries, a legal minimum wage exists in the UK. While national product market competition is strong, exposure to international competition is weak compared to the other two countries. All these institutional dimensions — the type and effectiveness of collective wage bargaining, the system of unemployment benefits, the system of taxes, the level of employment protection and the regulation of product markets — affect the wage-setting mechanism, the reservation wage and the scope for bargaining, which in turn have an impact on the responsiveness of wages to labor supply shocks. A comparative analysis of these three countries therefore promises new insights into the impact of immigration. Our theoretical framework derives the wage and employment effects of immigration from a wage-setting approach (e.g. Layard and Nickell, 1986 and Layard et al., 2005). A similar framework has been recently adopted for an empirical investigation of the labor market effects of migration by Brücker and Jahn (2011) and Felbermayr et al. (2010). This approach rests on the empirically supported assumption that wages respond to changes in the unemployment rate, albeit imperfectly. The elasticity between wages and unemployment depends on the wage-setting mechanism, other labor market institutions which affect the reservation wage and the value of the outside option, and competition in product markets which determines inter alia the scope for wage bargaining or efficiency wages. Thus, the elasticity between wages and unemployment reflects the different institutional features which characterize the three countries we investigate. In our empirical application of this approach we assume that the elasticity of this wage-setting curve varies across different types of workers. Once wages are fixed, firms adjust their employment in a way which maximizes their profits. Applying this right-to-manage assumption — which in our view reasonably captures industrial relations in the three countries we investigate — we can derive the labor demand of firms by using a production function approach. Having estimated the elasticities of the wage-setting curves and the elasticities of substitution between different types of labor, we can solve for the wage and employment effects of immigration simultaneously and simulate the labor market effects of immigration for different groups. The production function approach was pioneered by Grossman (1982) and Borjas (1987) in the immigration literature and experienced a renaissance since the seminal papers by Borjas (2003) and Ottaviano and Peri (2012).2 Analogous to this literature we approximate production technologies by a nested CES function, which distinguishes labor by education, experience and national origin. Relying on similar assumptions about production technologies as other structural estimation approaches makes our findings at least partially comparable. Nevertheless, it is important to understand the differences between our model and estimation strategy and the standard approaches in this strand of the literature: Borjas (2003) (in the structural part of his paper), Ottaviano and Peri (2012) and others derive the wage effects of immigration from a framework where labor supply is assumed to be exogenous and inelastic. This assumption inter alia rules out involuntary unemployment which is a ubiquitous phenomenon, at least in the European context. 3 In contrast, we replace a standard labor supply function by a set of wage-setting equations where wages are explained by the unemployment rate, and — following the nested structure of the production function — numerous labor demand equations. Our theoretical framework has important consequences for the identification strategy in this paper. Both the wage-setting equations and the labor demand equations are affected by simultaneity bias. The simultaneity problem arises in the wage setting equations since an unobserved shock to the wage will — via the demand curve — raise unemployment, and this will bias the estimate of the (assumed negative) coefficient towards zero. Suitable instruments should be therefore exogenously correlated with the unemployment rate without affecting the wage directly. Following the literature we use instruments capturing exogenous export demand and sectoral technology shocks. Analogously, the labor demand equations suffer from a simultaneity problem if an unobserved shock to labor demand, via the wage-setting curve, raises the wage and, thus, biases the estimated coefficient towards zero. A suitable instrument is thus a variable which affects wages without directly affecting labor demand. We therefore use instruments which affect the reservation wage, for example household composition or the household income of unemployed individuals. The reservation wage should affect the wage rate, but not directly labor demand. Thus, the use of an imperfect labor market framework leads to a different estimation strategy compared to a framework which treats labor supply as exogenous and inelastic. Nevertheless, our approach also shares many features with the traditional literature, i.e. the nested structure of the production function and the respective classification of workers by education, experience and national origin. These classification decisions are often disputed; see the contributions and comments by Borjas et al. (2012), Card (2012), Dustmann and Preston (2012), Ottaviano and Peri (2012) and Manacorda et al. (2012) in the Journal of the European Economic Association. Most controversial is the extent to which natives and migrants in particular education and experience classes are close substitutes. From a policy perspective this is an important issue because the distributional effects of immigration are largely affected by the elasticity of substitution between natives and immigrants. We examine this issue by applying different classifications of education and experience groups, and by using different weights. Our contribution can be considered to be complementary to the large literature which attempts to estimate the wage and employment effects of immigration directly (for a review, Altonji and Card, 1991, Borjas et al., 1996, Pischke and Velling, 1997, Dustmann et al., 2005, Glitz, 2012 and Friedberg and Hunt, 1995). The most common approach in this literature is to use the variation in migration rates across geographical areas, in which the wage or employment rate of natives in a given location is regressed on the relative quantity of immigrants in that same area, with appropriate controls. One of the main difficulties of this strategy arises from immigrants' potentially endogenous choice of location. Many researchers use therefore either experimental or quasi-experimental evidence (e.g. Card, 1990, Glitz, 2012 and Kugler and Yuksel, 2009), or instrumental variable estimation strategies (e.g. Dustmann et al., 2005 and Pischke and Velling, 1997). However, it is still possible that this approach fails to allow for other factors which might bias results, such as when capital movements, trade or natives' labor mobility spread the effects of immigration to other regions.4 Moreover, the spatial correlation approach enables one only to identify the partial effects of immigration rather than the cross effects between different segments of the labor market. Nevertheless, the direct approach imposes less structure on the estimation equations and the outcomes depend therefore less on theoretical assumptions which remain somewhat arbitrary. In this sense, the findings of both strands of the literature should reinforce each other. Another contribution of our paper is the use of a comparative approach. While there are numerous single-country studies which apply both structural approaches and direct estimates of the wage and employment effects of immigration, these studies typically differ in their methodological approaches, the specifications of the estimated equations, the treatment of the data and the time periods covered. There are therefore severe limitations in the comparability of the findings. One of the few exceptions in the literature is the cross-country study by Aydemir and Borjas (2007), which analyzes the wage effects of immigration in Canada, Mexico and the US, employing a production function framework and using disaggregated micro data. Nevertheless, due to data limitations the time periods covered by this study still differ somewhat across countries. Our empirical analysis is based on micro data sets in Denmark, Germany and the UK which provide annual observations. These data are derived from social security records from Denmark and Germany and household survey data from the UK. These data enable us to cover the same time period, namely the period from 1993 to 2009, although further observations are available in Germany and the UK. Although some limitations in the comparability of the data still remain, we have attempted to harmonize the definitions and classifications in the individual data sets as much as possible. Therefore we argue that the findings in this paper are more comparable than those from the single-country studies in the literature. The comparative approach in this paper allows us to provide new insights in two particular areas. First, our estimates of the wage curve allow us to assess whether wage rigidities differ across countries, and, therefore whether immigration has differential wage effects. Although we cannot trace the direct effect of particular labor market institutions on the extent of this wage rigidity, this does at least provide some indirect evidence on the role of labor market institutions. Second, our estimates of the labor demand equations allow us to assess the extent to which the elasticities of substitution (particularly between natives and migrants) differ across countries. Applying several robustness checks demonstrates furthermore how sensitive these estimates are across countries. The remainder of the paper is organized as follows. Section 2 outlines our theoretical framework. Section 3 briefly describes the data we use.5Section 4 presents the empirical model, the identification strategy and the estimation results for the elasticities of the wage-setting curves and the parameters of the production function. Section 5 simulates the employment and wage impact of immigration in Denmark, Germany and the UK. Finally, Section 6 concludes.

This paper uses a wage-setting approach to analyze the wage and employment effects of immigration in Denmark, Germany and the UK. We apply an estimation and instrumentation strategy which does not rely on the assumption of clearing labor markets, and we derive the wage and unemployment effects simultaneously from a coherent framework which considers wage rigidities. Because institutions and policies differ significantly between countries, in this paper we take a comparative perspective in a setting with imperfect labor markets. Our findings suggest that labor market institutions do play an important role in determining the wage and employment effects of immigration, although the degree differs somewhat across countries. In the UK, where labor markets are characterized by a high level of wage flexibility we find the highest elasticity between wages and unemployment. The differences are however not as large as one might expect. A more intriguing finding is that the elasticity between wages and unemployment tends to increase monotonically with the skill level of workers in Germany and the UK, while it tends to decline in Denmark. While the former result can be explained by a lower union density and coverage of collective bargaining in the high skilled segments of the labor markets in Germany and the UK, the latter finding might be traced back to different causes: an industrial relation system which is characterized by a high union density and a high coverage of collective bargaining in the medium and upper segments of the labor market, a high share of public sector employment among the high-skilled and the progressive tax system. In Germany, where immigrants concentrate in labor market segments with a low wage flexibility, we find that immigration has only minor wage effects, but a large impact on the unemployment rate. In contrast, we find in the UK and Denmark larger wage and smaller unemployment effects. Again, wage flexibility in combination with the structure of the labor supply can explain these differences. The UK, where wage flexibility is particularly high in the high-skilled segment, has the best educated immigrant workforce among our three countries. In Denmark, immigrants are disproportionately represented in the less-skilled segment of the labor market, where the responsiveness of wages to unemployment is again high. Thus, depending on the wage flexibility and the composition of the immigrant labor supply shock, we find different effects of immigration on wages and unemployment. An important factor which affects our results is the labor market assimilation of immigrants, measured in terms of the elasticity of substitution between native and foreign workers. Whether, and to what extent, immigrants and natives are imperfect substitutes in the labor market is subject of ongoing controversies in the literature. Our findings indicate, in line with many other studies, that they are imperfect substitutes. These findings are robust to the use of alternative weights, definitions of the dependent variable and reclassification of education and work experience. Comparing our results with a counterfactual scenario where labor markets clear and labor supply is inelastic, we find striking differences across the three countries: In Germany, simulations based on our wage-setting approach deliver only half of the wage impact a counterfactual scenario with clearing labor markets and inelastic labor supply would predict. In contrast, in Denmark and the UK, the wage adjustment is about four-fifths of that predicted by a scenario with perfect wage adjustment. As outlined above, the differences between Germany and the two other countries can be explained by the fact that the labor supply shock is concentrated in labor market segments with a low wage flexibility in Germany, while the reverse is true in the two other countries. Nevertheless, even in Denmark and the UK the differences between the wage-setting simulations and the counterfactual scenario suggest that it is worthwhile to take the role of labor market institutions into account when analysing the wage effects of immigration.