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A search and matching approach to business-cycle migration in the euro area

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  • Hart, Janine
  • Clemens, Marius

Abstract

Recently migration patterns in the euro area changed markedly in response to increasing unemployment disparities. This reinforced the interest in labor mobility as stabilization tool against the background of heterogeneous labor market conditions. In a data set of 55 bilateral migration corridors in the euro area over the period 1980-2010 we find evidence for business-cycle related fluctuations in net migration flows and the crucial role of unemployment and vacancies in shaping migration patterns. We propose a two-country DSGE model with migration that is able to replicate the empirical facts on business-cycle migration. In this model unemployment arises from search and matching frictions. We endogenize migration via the unemployed workers choice on which labor market to search for a job. The framework allows to account for wage and unemployment gaps between natives and immigrants over the cycle as well as for factors such as language barriers that hinder the labor market integration of foreigners. We find that the impact of migration on country-specific average wages and unemployment depends crucially on the characteristics of immigrants and natives as well as the institutional characteristics of the total corridor, i.e. search efficiency. The model will be used to analyze the effects of different immigration and labor market policies on migration patterns and welfare.

Suggested Citation

  • Hart, Janine & Clemens, Marius, 2019. "A search and matching approach to business-cycle migration in the euro area," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203659, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc19:203659
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    Cited by:

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    2. Germano Ruisi, 2020. "An Assessment of the Macroeconomic Implications of Foreign and Domestic Labour Supply Shocks in Malta," CBM Working Papers WP/06/2020, Central Bank of Malta.
    3. Micheli, Martin, 2020. "Aggregate stability under a budget rule and labor mobility," Economic Modelling, Elsevier, vol. 93(C), pages 510-519.
    4. Lozej, Matija, 2019. "Economic migration and business cycles in a small open economy with matching frictions," Economic Modelling, Elsevier, vol. 81(C), pages 604-620.
    5. Ikhenaode, Bright Isaac & Parello, Carmelo Pierpaolo, 2020. "Immigration and remittances in a two-country model of growth with labor market frictions," Economic Modelling, Elsevier, vol. 93(C), pages 675-692.
    6. Mercè Sala-Rios & Teresa Torres-Solé & Mariona Farré-Perdiguer, 2018. "Immigrants’ employment and the business cycle in Spain: taking account of gender and origin," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 463-490, August.

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    More about this item

    Keywords

    Labor Migration; Unemployment; Search and Matching;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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