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Immigration and National Wages: Clarifying the Theory and the Empirics

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  • Gianmarco I P Ottaviano

    (Università di Bologna)

  • Giovanni Peri

    (University of California)

Abstract

This paper estimates the effects of immigration on wages of native workers at the national U.S. level. Following Borjas (2003) we focus on national labor markets for workers of different skills and we enrich his methodology and refine previous estimates. We emphasize that a production function framework is needed to combine workers of different skills in order to evaluate the competition as well as cross-skill complementary effects of immigrants on wages. We also emphasize the importance (and estimate the value) of the elasticity of substitution between workers with at most a high school degree and those without one. Since the two groups turn out to be close substitutes, this strongly dilutes the effects of competition between immigrants and workers with no degree. We then estimate the substitutability between natives and immigrants and we find a small but significant degree of imperfect substitution which further decreases the competitive effect of immigrants. Finally, we account for the short run and long run adjustment of capital in response to immigration. Using our estimates and Census data we find that immigration (1990-2006) had small negative effects in the short run on native workers with no high school degree (-0.7%) and on average wages (-0.4%) while it had small positive effects on native workers with no high school degree (+0.3%) and on average native wages (+0.6%) in the long run. These results are perfectly in line with the estimated aggregate elasticities in the labor literature since Katz and Murphy (1992). We also find a wage effect of new immigrants on previous immigrants in the order of negative 6%.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.77.

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Date of creation: Sep 2008
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Handle: RePEc:fem:femwpa:2008.77

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Keywords: Less Educated Workers; Physical Capital Adjustment; Skill Complementarities and Wages;

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References

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  1. John DiNardo & David Card, 2000. "Do Immigrant Inflows Lead to Native Outflows?," American Economic Review, American Economic Association, vol. 90(2), pages 360-367, May.
  2. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
  3. Francesco D'Amuri & Gianmarco I. P. Ottaviano & Giovanni Peri, 2008. "The Labor Market Impact of Immigration in Western Germany in the 1990's," Temi di discussione (Economic working papers) 687, Bank of Italy, Economic Research and International Relations Area.
  4. David Card, 2007. "How Immigration Affects U.S. Cities," CReAM Discussion Paper Series 0711, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
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  6. Ottaviano, Gianmarco I. P. & Peri, Giovanni, 2007. "Rethinking the effects of immigration on wages," HWWI Research Papers 3-8, Hamburg Institute of International Economics (HWWI).
  7. Caselli, Francesco & Coleman II, Wilbur John, 2000. "The World Technology Frontier," CEPR Discussion Papers 2584, C.E.P.R. Discussion Papers.
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  24. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
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  27. Felbermayr, Gabriel J. & Geis, Wido & Kohler, Wilhelm K., 2008. "Restrictive immigration policy in Germany: pains and gains foregone?," Discussion Paper Series 1: Economic Studies 2008,18, Deutsche Bundesbank, Research Centre.
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  29. George J. Borjas & Jeffrey Grogger & Gordon H. Hanson, 2008. "Imperfect Substitution between Immigrants and Natives: A Reappraisal," NBER Working Papers 13887, National Bureau of Economic Research, Inc.
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  1. Productivity vs immigration
    by chris dillow in Stumbling and Mumbling on 2011-04-07 12:58:12
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