Employment, Wage Structure, and the Economic Cycle: Differences between Immigrants and Natives in Germany and the UK Christian Dustmann (UCL, CReAM), Albrecht Glitz (Universitat Pompeu Fabra, CReAM) and Thorsten Vogel (Humboldt-Universität zu Berlin, CReAM)1 June 2008 Abstract: Differences in the cyclical pattern of employment and wages of immigrants relative to natives have largely gone unnoticed in the migration literature. In this paper, we address this issue. Based on over two decades of micro data, our investigation covers two of the largest immigrant receiving countries in Europe, Germany and the UK. We show that despite the heterogeneity in their immigrant populations, there are similar differences in cyclical responses between both countries’ immigrant and native populations, even conditional on skills, age, and other background characteristics. To obtain a summary measure for these differences across and within education groups, we estimate a factor type model that, using regional variation in economic conditions, separates responses to economic shocks from secular trends. We then provide a number of possible explanations for our findings. Keywords : Immigration, Wage Structure, Business Cycle JEL : E32, F22, J31 1 Corresponding author: Christian Dustmann, Department of Economics, University College London, Drayton House, 30 Gordon Street, London, WC1H 0AX, UK. Email:
[email protected] . Tel: +44-20-7679- 5832. Fax: +44-20-7916-2775. This project has been supported by a grant from the Anglo-German Foundation. We also thank the Barcelona Economics Program of CREA for its support. We are grateful to Stefan Bender and Johannes Ludsteck for assistance with the German data, and to Nikos Theodoropoulos for assistance with the UK data.