Dustmann, C.; Glitz, A.; Vogel, T.; (2006) Employment, wage structure, and the economic cycle: differences between immigrants and natives in Germany and the UK. (Discussion Paper Series 09/06). Centre for Research and Analysis of Migration: London, UK.

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Abstract

Differences in the cyclical pattern of employment and wages of immigrants relative to natives have largely gone unnoticed in the migration literature. In this paper we show that immigrants and natives react differently to the economic cycle. Based on over two decades of micro data, our investigation is for two of the largest immigrant receiving countries in Europe which at the same time are characterised by different immigrant populations as well as different economic cycles, Germany and the UK. Understanding the magnitude, nature and possible causes of differences in responses is relevant for assessing the economic performance of immigrant communities over time. We show that there are substantial differences in cyclical responses between immigrants and natives. Our analysis illustrates the magnitude of these differences, while distinguishing between different groups of immigrants. Differences in responses may be due to differences in the skill distribution between immigrant groups and natives, or differences in demand for immigrants and natives of the same skills due to differential allocation of immigrants and natives across industries and regions. We demonstrate that substantial differences in cyclical patterns remain, even within narrowly defined groups. Finally, we estimate a more structural factor type model that, using regional variation in economic conditions, separates responses to economic shocks from a secular trend and allows us to obtain a summary measure for these differences within education groups.

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