Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316348 
Year of Publication: 
2025
Series/Report no.: 
ECONtribute Discussion Paper No. 358
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
In this study we evaluate the effects of low-skilled immigration on small businesses, wages and employment in Germany. We develop a search and matching model with heterogeneous workers, cross-skill matching, and endogenous entry into entrepreneurship. The model is calibrated using German Socio-Economic Panel (SOEP) data. Quantitative analysis shows that low-skilled immigration benefits high-skilled workers while negatively affecting the welfare of low-skilled workers. It leads to the endogenous expansion of immigrant entrepreneurial activities, generating positive spillovers for all demographic groups except native entrepreneurs. Overall, there is a marginal loss to the economy in terms of per worker welfare. This loss is mitigated with increased skilled migration from India. Policies restricting immigrant entrepreneurship relax competition for native small businesses but reduce welfare for all other worker groups. Ethnic segregation of small businesses benefits low-skill native entrepreneurs.
Subjects: 
entrepreneurship
small business
self-employment
search frictions
immigration
JEL: 
J23
J31
J61
J64
L26
Document Type: 
Working Paper

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