DP14562 Should Germany Have Built a New Wall? Macroeconomic Lessons from the 2015-18 Refugee Wave
In 2015-2016 Germany experienced a wave of predominantly low-skilled refugee
immigration. We evaluate its macroeconomic and distributional effects using a quantitative
overlapping generations model calibrated using German micro data to replicate
education and productivity differentials between foreign born and native workers.
Workers are modelled as imperfect substitutes in aggregate production leading to endogenous
wage differentials. We simulate the dynamic effects of this refugee wave, with
specific focus on the welfare impact on low skilled natives. Our results indicate that
the small losses this group suffers can be compensated by welfare gains of other parts
of the native population.