In a recent paper, Ottaviano and Peri (2007a) report evidence that immigrant and native workers are not perfect substitutes within narrowly defined skill groups. The resulting complementarities have important policy implications because immigration may then raise the wage of many native-born workers. We examine the Ottaviano-Peri empirical exercise and show that their finding of imperfect substitution is fragile and depends on the way the sample of working persons is constructed. There is a great deal of heterogeneity in labor market attachment among workers and the finding of imperfect substitution disappears once the analysis adjusts for such heterogeneity. As an example, the finding of immigrant-native complementarity evaporates simply by removing high school students from the data (under the Ottaviano and Peri classification, currently enrolled high school juniors and seniors are included among high school dropouts, which substantially increases the counts of young low-skilled workers ). More generally, we cannot reject the hypothesis that comparably skilled immigrant and native workers are perfect substitutes once the empirical exercise uses standard methods to carefully construct the variables representing factor prices and factor supplies.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13887.
Length: Date of creation: Mar 2008 Date of revision: Handle: RePEc:nbr:nberwo:13887
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Find related papers by JEL classification: J01 - Labor and Demographic Economics - - General - - - Labor Economics: General J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
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Katherine Cuff & Nicolas Marceau & Steeve Mongrain & Joanne Roberts, 2009.
"Optimal Policies and the Informal Sector,"
Working Papers
2009-12, Department of Economics, University of Calgary, revised 10 Jan 2009.
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