Immigration and the skill premium

Alessia Lo Turco (1) , Daniela Maggioni (2) , Federico Trionfetti (3)

1 UNIVPM - Polytechnic University of Marche [Ancona, Italy] / Università Politecnica delle Marche [Ancona, Italia]
2 Unicatt - Università cattolica del Sacro Cuore [Milano]
3 AMSE - Aix-Marseille Sciences Economiques

Data on EU economies show no correlation between low-skilled immigration and the skill premium. We rationalise this evidence in a model where firms face search and screening costs. Low-skilled immigration diminishes the relative benefit of screening skilled workers, leading to a decline in their relative ability within the firm and an undetermined impact on the skill premium. On region-sector and firm level data from 2008 to 2013, we find that low-skilled immigration in Italian regions has reduced skill intensity without affecting the skill premium. Using proxies for workers’ ability and screening activity, we provide supporting evidence for the theorised mechanisms.

Keywords: Matching; screening; skill-intensity; factor relative ability

Domains: Economics and Finance

Alessia Lo Turco, Daniela Maggioni, Federico Trionfetti. Immigration and the skill premium. 2024. ⟨hal-04556685⟩