Abstract
Immigration is often blamed for increasing unemployment among local workers. This sentiment is reflected in the rise of anti-immigration parties and policies in Western democracies. And in fact, numerous studies estimate that in the short run, the arrival of new workers in a labor market raises the unemployment rate of local workers. Yet, standard migration models inherently assume that migrants are absorbed into the labor market without affecting local unemployment. This paper presents a more general model of migration that allows for the possibility that not only the wages but also the unemployment rate of local workers may be affected by migration. The model blends a matching framework with job rationing. In it, the arrival of new workers raises the unemployment rate among local workers, particularly in a depressed labor market where job opportunities are limited. On the positive side, in-migration helps firms fill vacancies more easily, boosting their profits. The overall impact of in-migration on local welfare varies with labor market conditions: in-migration reduces welfare when the labor market is inefficiently slack but enhances it when the labor market is inefficiently tight. Finally, with high-skill and low-skill labor, in-migration always raises unemployment in the skill group that receives the migrants, while unemployment in the other group rises when the two skills are net substitutes in production and falls when they are net complements.
Figure 1E: Small reduction in local employment after in-migration in good times
Figure 1F: Large reduction in local employment after in-migration in bad times
Figure 2D: Migration-induced unemployment over the business cycle
Citation
Michaillat, Pascal. 2026. “Modeling Migration-Induced Unemployment.” arXiv:2303.13319v6. https://doi.org/10.48550/arXiv.2303.13319.
@techreport{M26,
author = {Pascal Michaillat},
year = {2026},
title = {Modeling Migration-Induced Unemployment},
number = {arXiv:2303.13319v6},
doi = {https://doi.org/10.48550/arXiv.2303.13319}}