Protective or Counter-Productive? European Labor Market Institutions and the Effect of Immigrants on EU Natives

Joshua Angrist, Adriana Kugler

NBER Working Paper No. 8660
Issued in December 2001
NBER Program(s):Labor Studies

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.

download in pdf format
   (425 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8660

Published: Angrist, Joshua D. and Adriane D. Kugler. "Protective Or Counter-Productive? Labour Market Institutions And The Effect Of Immigration On EU Natives," Economic Journal, 2003, v113(488,Jun), F302-331.

Users who downloaded this paper also downloaded* these:
Borjas w9755 The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market
Altonji and Card The Effects of Immigration on the Labor Market Outcomes of Less-skilled Natives
Kugler and Yuksel w14293 Effects of Low-Skilled Immigration on U.S. Natives: Evidence from Hurricane Mitch
Ortega and Peri w14833 The Causes and Effects of International Migrations: Evidence from OECD Countries 1980-2005
D'Amuri, Ottaviano, and Peri w13851 The Labor Market Impact of Immigration in Western Germany in the 1990's
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us