Title: A search and matching approach to business-cycle migration in the Euro area
Authors: Janine Hart - University of Potsdam, Berlin Doctoral Program in Economics and Management Sciences (Germany) [presenting]
Marius Clemens - DIW Berlin (Germany)
Abstract: Recently migration patterns in the Euro area changed markedly and 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 evidence is provided for business-cycle related fluctuations in net migration flows and the crucial role of wages, unemployment and vacancies in shaping migration patterns. The empirical facts on business-cycle migration are replicated in a two-country DSGE model with migration and search frictions. Endogenous migration is modelled via the unemployed workers choice on which labor market to search for a job. The framework allows us 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. In the model set up 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.