The effects of refugee immigration on income inequality in Germany: A case study

Income inequality is a major public concern in many Western countries. The problem has intensified with the recent high immigration rates in Europe, particularly from outside the continent. However, the linkage between refugee immigration and income inequality in host countries has not been adequately investigated. This article employs a two-step approach to examine whether and to what extent refugee immigration affects income inequality. The first step is a literature review, the second the formulation and utilization of a classic production model with labor sub-divided into different qualification groups. After a discussion of the theoretical implications of the model, it is then applied to Germany's refugee immigration situation in 2015 and 2016. The results suggest that a rise in mostly low-skilled immigration may be accompanied by an increase in income inequality. The linkage between the concepts highlights the need for further research as well as for efforts to curb uncontrolled, low-skilled immigration.