Undocumented Worker Employment and Firm Survival
AbstractDo firms employing undocumented workers have a competitive advantage? Using administrative data from the state of Georgia, this paper investigates the incidence of undocumented worker employment across firms and how it affects firm survival. Firms are found to engage in herding behavior, being more likely to employ undocumented workers if competitors do. Rivals' undocumented employment harms firms' ability to survive, while firms' own undocumented employment strongly enhances their survival prospects. This suggests that firms enjoy cost savings from employing lower-paid undocumented workers at wages less than their marginal revenue product. The herding behavior and competitive effects are found to be much weaker in geographically broad product markets, where firms have the option to shift labor-intensive production out of state or abroad.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3936.
Length: 45 pages
Date of creation: Jan 2009
Date of revision:
Publication status: published as 'Does Employing Undocumented Workers Give Firms a Competitive Advantage?' in: Journal of Regional Science, 2013, 53 (1), 158–170
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Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-24 (All new papers)
- NEP-LAB-2009-01-24 (Labour Economics)
- NEP-MIC-2009-01-24 (Microeconomics)
- NEP-MIG-2009-01-24 (Economics of Human Migration)
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- Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2009. "Employer monopsony power in the labor market for undocumented workers," Working Paper, Federal Reserve Bank of Atlanta 2009-14, Federal Reserve Bank of Atlanta.
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