Restrictive immigration policy in Germany:pains and gains foregone?

Many European countries restrict immigration from new EU member countries. The rationaleis to avoid adverse wage and employment eects. We quantify these eects forGermany. Following Borjas (2003), we estimate a structural model of labor demand,based on elasticities of substitution between workers with dierent experience levels andeducation. We allow for unemployment which we model in a price-wage-setting framework.Simulating a counterfactual scenario without restrictions for migration from newEU members countries, we nd moderate negative wage eects, combined with increasedunemployment for some types of workers. Wage-setting mitigates wage cuts.[...]