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Department of Economics, Copenhagen Business School Working Paper Series, Department of Economics, Copenhagen Business School

No 07-2008:
Do Immigrants Affect Firm-Specific Wages?

Nikolaj Malchow-Møller, Jakob Roland Munch and Jan Rose Skaksen

Abstract: In this paper, we propose and test a novel effect of immigration on the wages of native workers. Existing studies have focused on the wage effects that result from changes in the aggregate labour supply in a competitive labour market. We argue that if labour markets are not fully competitive, the use of immigrants may also affect wage formation at the most disaggregate level – the workplace. Using linked employeremployee data, we find that an increased use of workers from less developed countries has a significantly negative effect on the wages of native workers at the workplace – also when controlling for potential endogeneity of the immigrant share using both fixed effects and IV. Additional evidence suggests that this effect works at least partly through a general effect on the wage norm in the firm of hiring employees with poor outside options (the immigrants).

Keywords: na; (follow links to similar papers)

JEL-Codes: D21; H32; (follow links to similar papers)

35 pages, January 1, 2009

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