Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282819 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16692
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We argue that the arrival of immigrants with low reservation wages can strengthen the monopsony power of firms. Firms can exploit "cheap" migrant labor by offering lower wages, though at the cost of forgoing potential native hires who demand higher wages. This monopsonistic trade-off can lead to large negative effects on native employment, which exceed those in competitive models, and which are concentrated among low-paying firms. To validate these predictions, we study changes in wage premia and employment across the firm pay distribution, during a large immigration wave in Germany. These adverse effects are not inevitable, and may be ameliorated through policies which constrain firms' monopsony power over migrants.
Subjects: 
immigration
monopsony
firms
JEL: 
J31
J42
J61
J64
J11
Document Type: 
Working Paper

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