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The Impact of Immigration on Wages, Internal Migration, and Welfare

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  • Suphanit Piyapromdee

Abstract

This article studies the impact of immigration on wages, internal migration, and welfare. Using U.S. Census data, I estimate a spatial equilibrium model where labour differs by skill level, gender, and nativity. Workers are heterogeneous in city preferences. Cities vary in productivity levels, housing prices, and amenities. I use the estimated model to assess the distributional consequences of several immigration policies. The results show that a skill selective immigration policy leads to welfare gains for low skill workers, but welfare losses for high skill workers. The negative impacts are more substantial among the incumbent high skill immigrants. Internal migration mitigates the initial negative impacts, particularity in cities where housing supplies are inelastic. However, the negative wage impacts on some workers intensify. This is because an out-migration of workers of a given type may raise the local wages for workers of that type, while reducing the local wages of workers with complementary characteristics. Overall, there are substantial variations in the welfare effects of immigration across and within cities. Further, I use the model to assess the welfare effects of the border wall between Mexico and the U.S. The results show that the potential benefits are significantly smaller than the proposed cost of construction.

Suggested Citation

  • Suphanit Piyapromdee, 2021. "The Impact of Immigration on Wages, Internal Migration, and Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 406-453.
    • Handle: RePEc:oup:restud:v:88:y:2021:i:1:p:406-453.
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    File URL: http://hdl.handle.net/10.1093/restud/rdaa029
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    Citations

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    Cited by:

    1. Mark Colas & John M. Morehouse, 2022. "The environmental cost of land‐use restrictions," Quantitative Economics, Econometric Society, vol. 13(1), pages 179-223, January.
    2. Colas, Mark & Saulnier, Emmett, 2023. "Vertical migration externalities," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    3. Alonso Alfaro-Urena & Benjamin Faber & Cecile Gaubert & Isabela Manelici & Jose P. Vasquez, 2022. "Responsible Sourcing? Theory and Evidence from Costa Rica," CESifo Working Paper Series 10108, CESifo.
    4. Glitz, Albrecht & Albert, Christoph & Llull, Joan, 2021. "Labor Market Competition and the Assimilation of Immigrants," CEPR Discussion Papers 16432, C.E.P.R. Discussion Papers.
    5. Joseph-Simon Görlach, 2023. "Borrowing Constraints and the Dynamics of Return and Repeat Migration," Journal of Labor Economics, University of Chicago Press, vol. 41(1), pages 205-243.
    6. Chiara Lacava, 2023. "Matching and sorting across regions," Journal of Economic Geography, Oxford University Press, vol. 23(4), pages 801-822.
    7. Benjamin Lester & David A. Rivers & Giorgio Topa, 2021. "The Heterogeneous Impact of Referrals on Labor Market Outcomes," Working Papers 21-34, Federal Reserve Bank of Philadelphia.
    8. Giacomo Battiston, 2022. "Rescue on Stage: Border Enforcement and Public Attention in the Mediterranean Sea," "Marco Fanno" Working Papers 0292, Dipartimento di Scienze Economiche "Marco Fanno".
    9. Holger Sieg & Chamna Yoon & Jipeng Zhang, 2023. "The Impact Of Local Fiscal And Migration Policies On Human Capital Accumulation And Inequality In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 57-93, February.
    10. Janeba, Eckhard & Schulz, Karl, 2023. "Nonlinear taxation and international mobility in general equilibrium," Journal of Public Economics, Elsevier, vol. 218(C).
    11. Ning Jia & Raven Molloy & Christopher Smith & Abigail Wozniak, 2023. "The Economics of Internal Migration: Advances and Policy Questions," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 144-180, March.
    12. Federico Carril-Caccia & Ana Cuadros & Jordi Paniagua, 2024. "Mind the gaps: Gender complementarities in migration and FDI," Working Papers 2402, Department of Applied Economics II, Universidad de Valencia.
    13. Mehra, Mishita & Kim, Daisoon, 2023. "Skilled immigration, offshoring, and trade," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).

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