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IZA Discussion Paper No. 17208
August 2024
Worker Power, Immigrant Sorting, and Firm Dynamics

This paper combines two of the most central features of modern labor markets —immigrants and unions — to examine the role of worker power in shaping immigrant sorting across firms, and how that subsequently influences the performance of firms and the careers of incumbent workers. First, unions push immigrants to enter lower-paying and lower-quality firms with weaker union representation. Second, these firms with weaker union representation are able to use the cheaper immigrant labor to scale up production, thereby out-competing firms with stronger union representation and capturing market share. Third, incumbent workers in firms with weaker union representation benefit by shifting into management positions and capturing some of the firm's increased rents. Fourth, despite benefiting incumbent workers in firms with weaker union representation, these workers are more likely to become union members themselves in response to greater contact with new immigrants. Broadly, our results cut across nearly all sectors but are considerably more muted in competitive markets.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Network Coordination
Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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