Immigrants do jobs that…

…natives could have done. The demolition of the narrative that large numbers of immigrants can enter a labor market without having much of an effect on native employment opportunities continues apace.

The new paper by Christian Dustmann, Uta Schönberg, and Jan Stuhler looks at what happened in some German labor markets after the fall of the Berlin Wall. It turns out that German localities bordering Czechoslovakia were affected by a policy that allowed some Czech workers to commute to jobs in Germany, but did not grant those workers any type of residency rights. The amount of commuting was substantial, “averaging to about 10% of local employment in municipalities closest to the border.”

So what happened?

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…A 1 percentage point increase in the inflow of Czech workers relative to employment in the baseline has led to about a 0.13 percent decrease in native wages, a 0.93 percent decrease in native local employment…A 1 percentage point increase in the employment share of Czech workers decreases the local wages and employment of unskilled natives by 0.20 and 1.37 percent, respectively, but of skilled natives by only 0.11 and 0.50 percent.

Obviously, I’m not surprised by these effects. What I find really interesting, and what makes the paper important, is the conceptual analysis of how immigration jointly affects wages and employment. For reasons that we do not yet fully understand, immigration sometimes has a large impact on native wages and a small impact on native employment. And, yet, the opposite is true in other contexts. The Dustmann-Schönberg-Stuhler paper opens up new avenues for research by introducing a technical framework that should eventually enable us to get a fuller understanding of why different labor markets react differently along different margins.

The paper is forthcoming in the Quarterly Journal of Economics.


Author: George Borjas

I am a Professor of Economics and Social Policy at the Harvard Kennedy School.