The Labour Market Impact of Immigration: Quasi-Experimental Evidence

In this paper we investigate the impact of ethnic German immigration on the German labour market. Ethnic German immigrants are exogenously allocated to local labour markets upon arrival in Germany. The ethnic German immigrant inflows therefore serve as a natural experiment of immigration, avoiding the typical endogeneity problem of immigrant inflows with regard to local labour market conditions. We analyse the effect of these exogenous inflows on wages and employment rates of different skill groups of the native population in different geographical areas between 1996 and 2001. Our results indicate negative employment effects but no effect on average wages. ∗University College London, Department of Economics & CReAM, Drayton House, 30 Gordon Street, London WC1H 0AX, UK, e-mail: [email protected] . I am grateful to Christian Dustmann, David Card, David Lee, Kenneth Chay and Emilia Del Bono for helpful comments and suggestions, and to Stefan Bender for invaluable support with the data. Parts of this paper were written while visiting the Department of Economics at Berkeley, which I thank for the hospitality. I also thank the ESRC for funding the project (award No. RES-000-23-0332). 1