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Rethinking the Gains from Immigration: Theory and Evidence from the U.S

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Author Info
Gianmarco I.P. Ottaviano (University of Bologna)
Giovanni Peri (University of California, Davis and NBER)

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Abstract

The standard empirical analysis of immigration, based on a simple labor demand and labor supply framework, has emphasized the negative impact of foreign born workers on the average wage of U.S.-born workers (particularly of those without a high school degree). A precise assessment of the average and relative effects of immigrants on U.S. wages, however, needs to consider labor as a differentiated input in production. Workers of different educational and experience levels are employed in different occupations and are therefore imperfectly substitutable. When taking this approach, one realizes that foreign-born workers are “complements” of U.S.-born workers in two ways. First, foreign-born residents are relatively abundant in the educational groups in which natives are scarce. Second, their choice of occupations for given education and experience attainments is quite different from that of natives. This implies that U.S.- and foreign-born workers with similar education and experience levels are imperfectly substitutable. Accounting carefully for these complementarities and for the adjustment of physical capital induced by immigration, the conventional finding of immigration’s impact on native wages is turned on its head: overall immigration over the 1980- 2000 period significantly increased the average wages of U.S.-born workers (by around 2%). Considering its distribution across workers, such an effect was positive for the wage of all native workers with at least a high school degree (88% of the labor force in year 2000), while it was null to moderately negative for the wages of natives without a high school degree.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.52.

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Date of creation: Apr 2006
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Handle: RePEc:fem:femwpa:2006.52

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Related research
Keywords: Foreign-Born Skill Complementarities Wages Gains from Migration

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Find related papers by JEL classification:
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pia M. Orrenius & Madeline Zavodny, 2006. "Does Immigration Affect Wages? A Look at Occupation-Level Evidence," IZA Discussion Papers 2481, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Catalina Amuedo-Dorantes & Sara de la Rica, 2008. "Does Immigration Raise Natives’ Income? National and Regional Evidence from Spain," DFAEII Working Papers 200807, University of the Basque Country - Department of Foundations of Economic Analysis II. [Downloadable!]
  3. Karin Mayr, 2008. "Optimal quota for sector-specific immigration," The Institute for International Integration Studies Discussion Paper Series iiisdp254, IIIS. [Downloadable!]
    Other versions:
  4. Subhayu Bandyopadhyay & Howard J. Wall, 2007. "Is there too little immigration? an analysis of temporary skilled migration," Working Papers 2006-062, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  5. Amuedo-Dorantes, Catalina & de la Rica, Sara, 2008. "Does Immigration Raise Natives’ Income? National and Regional Evidence from Spain," IZA Discussion Papers 3486, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Catalina Amuedo-Dorantes & Sara de la Rica, 2007. "Regional Differences in the Labor Market Impact of Immigration: Evidence from Spain," Working Papers 0024, San Diego State University, Department of Economics. [Downloadable!]
  7. Catalina Amuedo-Dorantes & Sara de la Rica, 2008. "Does Immigration Raise Natives’ Income? National and Regional Evidence from Spain," Working Papers 2008-17, FEDEA. [Downloadable!]
  8. Gianmarco I.P. Ottaviano & Giovanni Peri, 2006. "Rethinking the Effects of Immigration on Wages," NBER Working Papers 12497, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Gordon H. Hanson, 2006. "Illegal Migration from Mexico to the United States," NBER Working Papers 12141, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Brücker, Herbert & Jahn, Elke J., 2008. "Migration and the Wage Curve: A Structural Approach to Measure the Wage and Employment Effects of Migration," IZA Discussion Papers 3423, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Gindling, T. H., 2008. "South-South Migration: The Impact of Nicaraguan Immigrants on Earnings, Inequality and Poverty in Costa Rica," IZA Discussion Papers 3279, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Christian Dustmann & Tommaso Frattini & Ian Preston, 2008. "The Effect of Immigration along the Distribution of Wages," CReAM Discussion Paper Series 0803, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London. [Downloadable!]
  13. Orrenius, Pia M. & Zavodny, Madeline, 2008. "The Effect of Minimum Wages on Immigrants’ Employment and Earnings," IZA Discussion Papers 3499, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  14. Longhi, Simonetta & Nijkamp, Peter & Poot, Jacques, 2008. "Meta-Analysis of Empirical Evidence on the Labour Market Impacts of Immigration," IZA Discussion Papers 3418, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  15. Cristobal, Adolfo, 2006. "Skill-Upgrading and the Savings of Immigrants," MPRA Paper 221, University Library of Munich, Germany. [Downloadable!]
  16. Maude Toussaint-Comeau, 2007. "The impact of Mexican immigrants on U.S. wage structure," Working Paper Series WP-07-24, Federal Reserve Bank of Chicago. [Downloadable!]
  17. Hunt, Priscillia, 2008. "Are immigrants so stuck to the floor that the ceiling is irrelevant?," The Warwick Economics Research Paper Series (TWERPS) 838, University of Warwick, Department of Economics. [Downloadable!]
  18. Brücker, Herbert & Jahn, Elke J., 2008. "Migration and the Wage-Settings Curve: Reassessing the Labor Market Effects of Migration," Working Papers 08-4, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
  19. Peter Egger & Stefan Gruber & Mario Larch & Michael Pfaffermayr, 2007. "Knowledge–capital meets new economic geography," The Annals of Regional Science, Springer, vol. 41(4), pages 857-875, December. [Downloadable!] (restricted)
    Other versions:
  20. Nikolaj Malchow-Møller & Jakob Roland Munch & Jan Rose Skaksen, 2007. "Do Immigrants Affect Firm-Specific Wages?," IZA Discussion Papers 3264, Institute for the Study of Labor (IZA). [Downloadable!]
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