How do rigid labor markets absorb immigration? Evidence from France

Abstract

Abstract This paper investigates how immigration can affect the labor market outcomes of native workers when their wages are rigid. I use a rich dataset for France and decompose the native workers according to whether they are covered by fixed-term or indefinite-term contracts. Indefinite-term contracts are associated with higher wage protection than fixed-term contracts that allow firms to adjust wages as contracts expire. I use an empirical methodology which captures the direct effects of an immigrant-induced increase in labor supply on the labor market outcomes of natives who have similar skills. I find that the monthly wage of native workers covered by fixed-term contracts decreases in response to immigration, while employment is the margin through which native workers on indefinite-term contracts is affected.