Swiss Journal of Economics and Statistics

, Volume 146, Issue 4, pp 709–739 | Cite as

The effects of immigration on wages: An application of the structural skill-cell approach

Open Access


This paper investigates how recent immigration inflows from 2002 to 2008 have affected wages in Switzerland. This period is of particular interest as it marks the time during which the bilateral agreement with the EU on the free cross-border movement of workers has been effective. Since different types of workers are likely to be unevenly affected by recent immigration inflows, we follow the “structural skill-cell approach” as for example employed by Borjas (2003) and Ottaviano and Peri (2008). This paper provides two main contributions. First, we estimate empirically the elasticities of substitution between different types of workers in Switzerland. Our results suggest that natives and immigrants are imperfect substitutes. Regarding different skill levels, the estimates indicate that workers are imperfect substitutes across broad education groups and across different experience groups. Second, the estimated elasticities of substitution are used to simulate the impact on domestic wages using the actual immigration inflows from 2002 to 2008. For the long run, the simulations produce some notable distributional consequences across different types of workers: While previous immigrants incur wage losses (−1.6%), native workers are not negatively affected on average (+0.4%). In the short run, immigration has a negative macroeconomic effect on the average wage, which, however, gradually dies out in the process of capital adjustment.


E24 F22 J61 J31 


immigration wages labour demand labour supply skill groups elasticity of substitution 


  1. Akerlof, George A. (1982), “Labor Contracts as Partial Gift Exchange”, Quarterly Journal of Economics, 97 (4), pp. 543–569.CrossRefGoogle Scholar
  2. Altonji, J. G., and D. Card (1991), “The Effects of Immigration on the Labor Market Outcomes of Less-Skilled Natives”, in: NBER (ed.), Immigration, Trade and the Labor Market, pp. 201–234. NBER.Google Scholar
  3. Barro, R. J. (2001), “Human Capital and Growth”, American Economic Review, 91 (2), pp. 12–17.CrossRefGoogle Scholar
  4. Bodvarsson, O., and H. F. van den Berg (2006), “Does Immigration Affect Labor Demand? Model and Test”, Research in Labor Economics, 24, pp. 135–66.CrossRefGoogle Scholar
  5. Bodvarsson, O., and H. F. van den Berg (2009), The Economics of Immigration, Springer-Verlag, Berlin Heidelberg.Google Scholar
  6. Bodvarsson, O., H. F. van den Berg, and J. J. Lewer (2008), “Measuring Immigration’s Effects on Labor Demand: A Reexamination of the Mariel Boatlift”, Labour Economics, 15 (4), pp. 560–574.CrossRefGoogle Scholar
  7. Borjas, G. (2003), “The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration on the Labor Market”, Quarterly Journal of Economics, 118 (4), pp. 1335–1374.CrossRefGoogle Scholar
  8. Borjas, G., R. Freeman and L. Katz (1996), “Searching for the Effect of Immigration on the Labor Market”, Working paper, NBER No. W5454.Google Scholar
  9. Borjas, G., R. Freeman and L. Katz (1997), “How Much Do Immigration and Trade Affect Labor Market Outcomes?”, Brookings Papers on Economic Activity, 1, pp. 1–90.CrossRefGoogle Scholar
  10. Borjas, G., J. Grogger, and G. Hanson (2008), “Imperfect Substitution between Immigrants and Natives: A Reappraisal”, working paper, NBER No. W13887.Google Scholar
  11. Borjas, G., and L. Katz (2007), “The Evolution of the Mexican-Born Workforce in the United States”, in: Geoge Borjas (ed.), Mexican Immigration to the United States.Google Scholar
  12. Brücker, H., and E. J. Jahn (2008), “Migration and the Wage Curve: A Structural Approach to Measure the Wage and Employment Effects of Migration”, IZA.Google Scholar
  13. Card, D. (1990), “The Impact of the Mariel Boatlift on the Miami Labor Market”, Industrial and Labor Relations Review, 43 (2), pp. 245–257.CrossRefGoogle Scholar
  14. Caselli, F., G. Esquivel, and F. Lefort (1996), “Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics”, Journal of Economic Growth, 1 (3), pp. 363–89.CrossRefGoogle Scholar
  15. D’Amuri, F., G. Ottaviano, and G. Peri (2009), “The Labor Market Impact of Immigration in Western Germany in the 1990’s”, CReAM No. 810.Google Scholar
  16. De New, J. P., and K. F. Zimmermann (1994), “Native Wage Impacts of Foreign Labor: A Random Effects Panel Analysis”, Journal of Population Economics, 7 (2), pp. 177–92.CrossRefGoogle Scholar
  17. Felbermayr, G. J., W. Geis, and W. Kohler (2008), “Restrictive Immigration Policy in Germany: Pains and Gains Foregone?”, working paper, University of Tübingen.Google Scholar
  18. Gerfin, M., and B. Kaiser (2010), “The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach”, working paper, University of Bern. Available at:
  19. Haug, W., and D. Müller-Jentsch (2008), Die Neue Zuwanderung, NZZ Libro, Zürich.Google Scholar
  20. Islam, N. (1995), “Growth Empirics: A Panel Data Approach”, The Quarterly Journal of Economics, 110 (4), pp. 1127–70.CrossRefGoogle Scholar
  21. Islam, N. (2003), “What Have We Learnt from the Convergence Debate?”, Journal of Economic Surveys, 17 (3), pp. 309–362.CrossRefGoogle Scholar
  22. LaLonde, R. J., and R. H. Topel (1991), “Immigrants in the American Labor Market: Quality, Assimilation, and Distributional Effects”, American Economic Review, 81 (2), pp. 297–302.Google Scholar
  23. Manacorda, M., A. Manning, and J. Wadsworth (2006), “The Impact of Immigration on the Structure of Male Wages: Theory and Evidence from Britain”, working paper, IZA, No. 2352.Google Scholar
  24. McQuinn, K., and K. Whelan (2007), “Conditional Convergence and the Dynamics of the Capital-Output Ratio”, Journal of Economic Growth, 12 (2), pp. 159–184.CrossRefGoogle Scholar
  25. Ottaviano, G., and G. Peri (2006), “Rethinking the Effects of Immigration on Wages”, working paper, NBER, No. W12497.Google Scholar
  26. Ottaviano, G., and G. Peri (2007), “The Effects of Immigration on U.S. Wages and Rents: A General Equilibrium Approach”, working paper, CReAM, No. 713, University College London.Google Scholar
  27. Ottaviano, G., and G. Peri (2008), “Immigration and National Wages: Clarifying the Theory and the Empirics”, working paper, NBER, No. W14188.Google Scholar
  28. Pischke, J.-S., and J. Velling (1997), “Employment Effects of Immigration to Germany: An Analysis Based on Local Labor Markets”, The Review of Economics and Statistics, 79 (4), pp. 594–604.CrossRefGoogle Scholar
  29. Ramsey, F. (1928), “A Mathematical Theory of Saving”, Economic Journal, 38 (152), pp. 543–559.CrossRefGoogle Scholar
  30. SECO (2009), „Auswirkungen der Personenfreizügigkeit auf den Schweizer Arbeitsmarkt: 5. Bericht des Observatoriums zum Freizügigkeitsabkommen Schweiz-EU“, Annual Report.Google Scholar
  31. Solow, R. (1956), “A Contribution to the Theory of Economic Growth”, Quarterly Journal of Economics, 70 (1), pp. 65–94.CrossRefGoogle Scholar

Copyright information

© Swiss Society of Economics and Statistics 2010

Authors and Affiliations

  1. 1.Department of Economics, Public EconomicsUniversity of BernGermany

Personalised recommendations