Unemployment, Technology and the Welfare Effects of Immigration

This paper explores the effects of high and low skilled immigration to a hostcountry with unionized low skilled labor and an unemployment insurancescheme. It is shown that the consequences for the labor market and the welfareof natives depend crucially on the host country's production structure. Whenhigh and low skilled labor are close substitutes, low skilled immigration boostsemployment and can increase total native income. We provide conditionsunder which low skilled immigration is Pareto-improving. While high skilledimmigration has adverse employment effects, the findings reverse for the caseof close complementarity.