## Immigration and Wage Dynamics in Germany

_IMF Working Papers, December 27, 2019_

## Source details

**Canonical URL:** [Immigration and Wage Dynamics in Germany](https://www.imf.org/en/publications/wp/issues/2019/12/27/immigration-and-wage-dynamics-in-germany-48838)

## Other formats

- [Markdown version](/en/publications/wp/issues/2019/12/27/immigration-and-wage-dynamics-in-germany-48838/index.md)
- [Structured JSON version](/en/publications/wp/issues/2019/12/27/immigration-and-wage-dynamics-in-germany-48838/index.json)
- [Bundle manifest](/en/publications/wp/issues/2019/12/27/immigration-and-wage-dynamics-in-germany-48838/bundle-manifest.json)

## Bibliographic details
- Authors: Sabine Klinger, Anvar Musayev, Jean-Marc Natal, Enzo Weber
- Published: December 27, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513521145.001

---

### Summary
- German wages have not increased very rapidly in the last decade despite strong employment growth and a 5 percentage point decline in the unemployment rate.
- A large part of the decline in unemployment was structural.
- Micro-founded Phillips curves fit the German data rather well.
- Relatively low wage growth can be largely attributed to low inflation expectations and low productivity growth.
- There is no evidence—from either aggregate or micro-level administrative data—that large immigration flows since 2012 have had dampening effects on aggregate wage growth, as complementarity effects offset composition and competition effects.

### Major findings
- Wage dynamics:
  - Slow nominal wage increases over the last decade, despite strong employment growth.
  - Low inflation expectations and low productivity growth are identified as primary contributors to low wage growth.
- Unemployment and labor market structure:
  - Unemployment declined by 5 percentage points over the period discussed.
  - A large part of this unemployment decline is structural rather than cyclical.
- Immigration effects:
  - Large immigration flows since 2012 did not dampen aggregate wage growth.
  - Complementarity effects from immigration offset composition and competition effects.
- Model performance:
  - Micro-founded Phillips curves provide a good fit to German data.

### Data and methods (as reported)
- Evidence drawn from both aggregate data and micro-level administrative data.
- Analytical approach includes micro-founded Phillips curve estimation.
- Use of panel regression techniques and micro-data (keywords indicate WLS panel wage equation, wage Phillips curve, reservation wage considerations).

### Implications (interpretive points emphasized in the source)
- Low wage growth is linked to low inflation expectations and low productivity growth rather than to immigration-driven labor supply pressures.
- Structural improvements in labor market participation and employment underlie a substantial share of the unemployment decline.
- Immigration since 2012 appears to have neutral net effects on aggregate wages due to offsetting labor-market mechanisms (complementarity vs. composition and competition).

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2019/wpiea2019301-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2019/wpiea2019301-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2019/12/27/immigration-and-wage-dynamics-in-germany-48838_