GEP Research Paper 08/31
Unemployment and the Immigration Surplus
Udo Kreickemeier and Michael S. Michael
Summary
In a small open economy framework that features unemployment of unskilled labour, we examine the effect of unskilled immigration on employment of natives and on native welfare.
Abstract
Within a small open economy fair wage model with unemployment of unskilled workers, we show that exogenous unskilled immigration increases the welfare of natives if the elasticity of the inverse labour demands exceeds a positive finite threshold. This threshold depends positively on the displacement ratio of native workers by immigrants and negatively on the share of immigrants in the unskilled workforce.
Issued in September 2008
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