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

Dustmann, C; Schoenberg, U; Stuhler, J; (2017) Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment. The Quarterly Journal of Economics , 132 (1) pp. 435-483. 10.1093/qje/qjw032. Green open access

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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 nonemployment, suggesting that “outsiders” shield “insiders” from the increased competition.

Type: Article
Title: Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment
Open access status: An open access version is available from UCL Discovery
DOI: 10.1093/qje/qjw032
Publisher version: http://dx.doi.org/10.1093/qje/qjw032
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Immigration, wage effects, labor supply elasticity, internal migration
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1554497
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