Simulating the impact of immigration on wages and unemployment

This paper looks at the effects of migration in labour market models that allow for un- employment in equilibrium. We include three different models: a competitive labour market model, a wage bargaining model and an efficiency wage model. We simulate a one-percentage point increase in the labour force due to migration. Simulation results show that effects of migration do not differ that much between different labour market models: wages decrease with 0.3% to 0.4% and the unemployment rate increa…

This paper looks at the effects of migration in labour market models that allow for un- employment in equilibrium. We include three different models: a competitive labour market model, a wage bargaining model and an efficiency wage model. We simulate a one-percentage point increase in the labour force due to migration. Simulation results show that effects of migration do not differ that much between different labour market models: wages decrease with 0.3% to 0.4% and the unemployment rate increases with at most 0.24 percentage points. Migration also positively affects public financing by increasing government’s budget with 0.3% to 0.5%.