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The Heterogeneous Labor Market Effects of Immigration

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  • Mathis Wagner

Abstract

In this paper I provide estimates of the impact of immigration on native wage and employment levels (rather than on wage inequality which has been the focus of the literature). I use variation within 2-digit industries across regions using Austrian panel data from 1986 to 2004 for identification. Using an instrumental variable strategy I find large displacement effects in the service sector and large native employment increases in manufacturing due to immigration. This heterogeneous response is explained by large increases in output in manufacturing, due to a high elasticity of product demand, as immigration reduces the cost of production, while on average demand is far less elastic in service industries. Estimated substitution effects, for a given level of output, are large in both industries and in line with US estimates. The structural estimates imply that a 10% increase in the number of immigrants in all industries reduces average native wages by around 0.25% and results in 4% of the native labor force changing industry, primarily from services to manufacturing. Hence, the effect of immigration on worker relocation across industries is far larger than its impact on average native wages.

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Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 131.

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Length: 41 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:cca:wpaper:131

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Related research

Keywords: immigration; wages; employment; substitution effect; scale effect;

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Cited by:
  1. Thomas Horvath, 2012. "Immigration and the Distribution of Wages in Austria," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 3, pages 55-69, March.
  2. Gerard Thomas Horvath, 2011. "Immigration and Distribution of Wages in Austria," Economics working papers 2011-11, Department of Economics, Johannes Kepler University Linz, Austria.

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