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Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment

Author

Listed:
  • Christian Dustman

    (University College London)

  • Uta Schönberg

    (University College London)

  • Jan Stuhler

    (Universidad Carlos III de Madrid)

Abstract
By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standard models of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or non-employment, suggesting that “outsiders†shield “insiders†from the increased competition.

Suggested Citation

  • Christian Dustman & Uta Schönberg & Jan Stuhler, 2016. "Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment," RF Berlin - CReAM Discussion Paper Series 1617, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    • Handle: RePEc:crm:wpaper:1617
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Immigration; wage effects; labor supply elasticity; internal migration;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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