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Interacting Product and Labor Market Regulation and the Impact of Immigration on Native Wages

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  • Susanne Prantl

    (University of Cologne, Max Planck Institute for Research on Collective Goods, Bonn, and Institute for Fiscal Studies, London)

  • Alexandra Spitz-Oener

    (Humboldt-University Berlin, IAB, CASE and IZA)

Abstract

Does interacting product and labor market regulation alter the impact of immigration on wages of competing native workers? Focusing on the large, sudden and unanticipated wave of migration from East to West Germany after German reunification and allowing for endogenous immigration, we compare native wage reactions across different segments of the West German labor market: one segment without product and labor market regulation, to which standard immigration models best apply, one segment in which product and labor market regulation interact, and one segment covering intermediate groups of workers. We find that the wages of competing native West Germans respond negatively to the large influx of similar East German workers in the segment with almost free firm entry into product markets and weak worker influence on the decision-making of firms. Competing native workers are insulated from such pressure if firm entry regulation interacts with labor market institutions, implying a strong influence of workers on the decision-making of profit-making firms.

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  • Susanne Prantl & Alexandra Spitz-Oener, 2013. "Interacting Product and Labor Market Regulation and the Impact of Immigration on Native Wages," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_22, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2013_22
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    2. Liepmann, Hannah, 2018. "The impact of a negative labor demand shock on fertility – Evidence from the fall of the Berlin Wall," Labour Economics, Elsevier, vol. 54(C), pages 210-224.
    3. Hammer, Luisa & Hertweck, Matthias Sebastian, 2022. "EU Enlargement and (Temporary) Migration: Effects on Labour Market Outcomes in Germany," VfS Annual Conference 2022 (Basel): Big Data in Economics 264082, Verein für Socialpolitik / German Economic Association.
    4. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    5. Glitz, Albrecht & Wissmann, Daniel, 2017. "Skill Premiums and the Supply of Young Workers in Germany," IZA Discussion Papers 10901, Institute of Labor Economics (IZA).
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    Keywords

    Immigration; Product Market Regulation; Labor Market Regulation;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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