With the fall of the Berlin Wall, ethnic Germans living in eastern Europe and the former Soviet Union were given the opportunity to migrate to Germany. Within 15 years, 2.8 million individuals had done so. Upon arrival, these immigrants were exogenously allocated to different regions to ensure an even distribution across the country. Their inflow can therefore be seen as a quasi-experiment of immigration. I analyze the effect of these inflows on skill-specific employment rates and wages. The results indicate a displacement effect of 3.1 unemployed workers for every 10 immigrants that find a job, but no effect on relative wages.

This paper analyzes how changes in the skill mix of local labor supply are absorbed by the economy, distinguishing between three adjustment mechanisms: wages, expansion in size of those production units using the more abundant skill group more intensively, and more intensive use of the more abundant skill group within production units. We contribute to the literature by analyzing these adjustments on the firm rather than industry level, using German administrative data. We show that most adjustments occur within firms through changes in relative factor intensities and that firms entering and exiting the market are an important additional absorption mechanism.

We analyze how the formal recognition of foreign qualifications affects immigrants’ labor market outcomes. The empirical analysis is based on a novel German data set that links respondents’ survey information to their administrative records, allowing us to observe immigrants at monthly intervals before, during, and after their application for occupational recognition. We find that 3 years after obtaining recognition, immigrants earn 19.8% higher wages and are 24.5 percentage points more likely to be employed than immigrants in the control group. We further document that occupational recognition leads to full convergence of immigrants’ earnings to those of their native counterparts.