Title: Migration dynamics and the enlarged European labor market
Authors: Timo Baas - University of Duisburg-Essen (Germany) [presenting]
Marjan Aikimbaeva - University of Duisburg-Essen (Germany)
Abstract: The fifth wave of Enlargement in 2004 increased the population in the European Union by 75 million people or roughly one fifth. Old and new members agreed on a period of seven years till universal labor market access is granted for these citizens. After the end of transitional periods, labor mobility in the European Union is higher than in any previous time. The Enlarged European Labor Market is also more disperse in terms of wages and labor quality. A two-country stochastic general equilibrium model that incorporates a production function framework with migrant and native labor, rather than full substitutability, accounts for this higher degree of heterogeneity. The aggregate shocks estimated within this framework can rationalize migration dynamics between Poland and Germany, while providing a good fit to the macroeconomic data. Migration, indeed, follows cyclical patterns and fosters economic stability. This, however, holds especially true for the country of origin, as macroeconomic shocks of the destination country have a minor impact on migration flows.