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Problem or Opportunity? Immigration, Job Search, Entrepreneurship and Labor Market Outcomes of Natives in Germany

Author

Listed:
  • Zainab Iftikhar

    (University of Bonn & CEPR)

  • Anna Zaharieva

    (Bielefeld University)

Abstract

In this study we evaluate the effects of low-skilled immigration on small businesses, wages and employment in Germany. We develop a search and matching model with heterogeneous workers, cross-skill matching, and endogenous entry into entrepreneurship. The model is calibrated using German Socio-Economic Panel (SOEP) data. Quantitative analysis shows that low-skilled immigration benefits high-skilled workers while negatively affecting the welfare of low-skilled workers. It leads to the endogenous expansion of immigrant entrepreneurial activities, generating positive spillovers for all demographic groups except native entrepreneurs. Overall, there is a marginal loss to the economy in terms of per worker welfare. This loss is mitigated with increased skilled migration from India. Policies restricting immigrant entrepreneurship relax competition for native small businesses but reduce welfare for all other worker groups. Ethnic segregation of small businesses benefits low-skill native entrepreneurs.

Suggested Citation

  • Zainab Iftikhar & Anna Zaharieva, 2025. "Problem or Opportunity? Immigration, Job Search, Entrepreneurship and Labor Market Outcomes of Natives in Germany," ECONtribute Discussion Papers Series 358, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:358
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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_358_2025.pdf
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    More about this item

    Keywords

    Entrepreneurship; small business; self-employment; search frictions; immigration;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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