Immigration, occupational choice and public employment

This paper investigates the theoretical effects of immigration in an occupational
choice model with three sectors: a low-skilled, a high-skilled and a public
sector. The originality of our approach is to consider (i) intersectoral mobility
of labor and (ii) public employment. We highlight the fact that including a
public sector is crucial, since omitting it implies that low-skilled immigration unambiguously
reduces wages and welfare of all workers. However, when public
employment is considered, we demonstrate that immigration increases wages in
the high-skilled and the public sectors, provided that the immigrant workforce
is not too large and the access to public jobs is not too easy. The average wage
of natives may also increase accordingly. Moreover, immigration may improve
workers’ welfare in each sector. Finally, the mechanism underlying these results
does not require complementarity between natives and immigrants.