TY - JOUR AU - Angrist,Joshua AU - Kugler,Adriana TI - Protective or Counter-Productive? European Labor Market Institutions and the Effect of Immigrants on EU Natives JF - National Bureau of Economic Research Working Paper Series VL - No. 8660 PY - 2001 Y2 - December 2001 UR - http://www.nber.org/papers/w8660 L1 - http://www.nber.org/papers/w8660.pdf N1 - Author contact info: Joshua Angrist Department of Economics MIT, E52-353 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-8909 Fax: 617/253-1330 E-Mail: angrist@mit.edu Adriana D. Kugler Georgetown University Georgetown Public Policy Institute 37th and O Streets NW, Suite 311 Washington, DC 20057 Tel: 202/687-5716 Fax: 202/687-5544 E-Mail: ak659@georgetown.edu AB - We estimate the effect of immigrant flows on native employment in Western Europe, and then ask whether the employment consequences of immigration vary with institutions that affect labor market flexibility. Reduced flexibility may protect natives from immigrant competition in the near term, but our theoretical framework suggests that reduced flexibility is likely to increase the negative impact of immigration on equilibrium employment. In models without interactions, OLS estimates for a panel of European countries in the 1980s and 1990s show small, mostly negative immigration effects. To reduce bias from the possible endogeneity of immigration flows, we use the fact that many immigrants arriving after 1991 were refugees from the Balkan wars. An IV strategy based on variation in the number of immigrants from former Yugoslavia generates larger though mostly insignificant negative estimates. We then estimate models allowing interactions between the employment response to immigration and institutional characteristics including business entry costs. These results, limited to the sample of native men, generally suggest that reduced flexibility increases the negative impact of immigration. Many of the estimated interaction terms are significant, and imply a significant negative effect on employment in countries with restrictive institutions. ER -