Developing an immigration policy for Germany on the basis of a nonparametric labor market classification

Based on a nonparametrically estimated model of labor market classifications, this paper makes suggestions for immigration policy using data from western Germany in the 1990s. It is demonstrated that nonparametric regression is feasible in higher dimensions with only a few thousand observations. In sum, labor markets able to absorb immigrants are characterized by above average age and by professional occupations. On the other hand, labor markets for young workers in service occupations are identified to exhibit rising unemployment due to wage rigidities and are therefore not recommended for immigration. This raises a potential conflict between financing Germany's ailing social security system and protecting decreasing or rigid labor markets by immigration control. Download Internet Companion Paper: (pdf, 1814 kb)