اثرات مهاجرت در بازار کار اصطکاکی: نظریه و شواهد تجربی از کشورهای اتحادیه اروپا  The effects of immigration in frictional labor markets: Theory and empirical evidence from EU countries

1. Introduction The consequences of immigration on labor market outcomes and host country welfare have been extensively discussed in the economic literature, both theoretically and empirically. This paper analyzes the impact of an immigration-induced labor supply shock on the employment opportunities of native European workers. Theoretically, the labor market consequences of immigration have been framed within a standard neoclassical labor supply, labor demand framework (see Borjas (2003); Card (2001, 2005, 2009), and Ottaviano and Peri (2012)). In such a framework, in the short run, a labor supply shock generated by the arrival of immigrants triggers a reduction in the wages of competing natives, which in turn may discourage labor force participation. As a consequence, the crucial problem in this literature is determining against which natives immigrants are competing, and then, analyzing the distributional consequences of an immigration inflow (see for example Friedberg and Hunt (1995)). Yet, this framework has somewhat been challenged by empirical findings over the last two decades. Exploiting various experiences of immigration, in the US first, and more recently in Europe, the literature has failed to find a consistent negative impact of immigrants on natives’ labor market outcomes. A more recent literature has put some explanations forward. On the one hand, one stream argues that natives and immigrants are never perfectly substitutable. Notably, according to Ottaviano and Peri (2012), immigrants and natives, in spite of having similar “observable” skills, are not perfectly substitutable in production. According to their estimates, newly arrived immigrants are substitutes for older immigrants whereas they are imperfect substitutes for natives. Peri and Sparber (2011, 2009) or D’Amuri and Peri (2014) justify this finding by considering different relative skill endowments between natives and immigrants. Whereas natives have a comparative advantage in communication skill intensive jobs, immigrants have a comparative advantage in manual skill intensive jobs. A complementary relation arises then between both types of workers. Following an immigration-induced labor supply shock, natives reallocate towards communication and language intensive tasks, while immigrants become specialized in manual intensive tasks. A second stream of literature analyzes how immigration may affect the labor market decisions of natives with different skills with respect to immigrants through general-equilibrium effects. For the US data, Cortes and Tessada (2011) find that the reduction in the price of services (being close substitutes for household production) stemming from recent waves of low-skilled immigration has provided incentives for high-skilled women (earning above the median of the wage distribution) to substitute their own time invested in the production of household goods with work hours on the labor market. A similar study using Spanish data is proposed in Farré et al. (2011). They find that over the last decade immigration has led to the significant expansion of the household service sector and to an increase in the labor supply of women in high-earning occupations. A third stream of literature focuses rather on the endogenous nature of technological change. Lewis (2011) looks at labor demand side adjustment, and shows that firms adjust to unskilled labor supply shocks by adopting less skilled-biased technology. We propose an alternative factor explaining the absence of a negative impact on natives’ labor market outcomes: whatever the labor market considered, immigrants are newcomers. As a consequence, they lack host-country-specific labor market knowledge and other, although non directly productive, valuable assets. For instance, one such asset is the eligibility and amount of unemployment benefits which are conditional on past employment experience in host countries. These characteristics affect immigrants’ outside options and put them in a weaker bargaining position as compared to natives when they negotiate their wages with employers, making them more profitable workers. Following an inflow of immigrants, the average expected profit of firms operating in the receiving labor market increases, raising incentives to open more vacancies. We claim thus that, even if they are perfectly substitutable with natives in the production process, immigrants are at the origin of a positive externality.