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Rethinking the Area Approach: Immigrants and the Labor Market in California, 1960-2005

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  • Giovanni Peri

Abstract

I show that a CES production-function-based approach with skill differentiation and integrated national labor markets has predictions for the employment effect of immigrants at the local level. The model predicts that if I look at the employment (rather than wage) response by skill to immigration in a state, I can estimate the substitutability-complementarity between natives and immigrants. This allows me to infer, other things constant, how immigrants stimulate or depress the demand for native labor. I also use a novel instrument based on demographic characteristics of total Central American migrants or of the Mexican Population to predict immigration by skill level within California. Looking at immigration to California between 1960 and 2005 my estimates support the assumption of a nationally integrated labor market by skill and they support the hypothesis that natives and immigrants in the same education-experience group are not perfectly substitutable. This, in turn, explains the counter-intuitive fact that there is a zero correlation between immigration and wage and employment outcomes of natives.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16217.

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Date of creation: Jul 2010
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Handle: RePEc:nbr:nberwo:16217

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References

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  1. Ethan Lewis, 2005. "Immigration, skill mix, and the choice of technique," Working Papers 05-8, Federal Reserve Bank of Philadelphia.
  2. David Card & Ethan G. Lewis, 2007. "The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts," NBER Chapters, in: Mexican Immigration to the United States, pages 193-228 National Bureau of Economic Research, Inc.
  3. David Card, 1996. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Working Papers 747, Princeton University, Department of Economics, Industrial Relations Section..
  4. David Card & John E. DiNardo, 2000. "Do Immigrant Inflows Lead to Native Outflows?," NBER Working Papers 7578, National Bureau of Economic Research, Inc.
  5. Giovanni Peri & Chad Sparber, 2009. "Task Specialization, Immigration and Wages," Working Papers 91, University of California, Davis, Department of Economics.
  6. Gianmarco I.P. Ottaviano & Giovanni Peri, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," NBER Working Papers 14188, National Bureau of Economic Research, Inc.
  7. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
  8. 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.
  9. David Card, 2009. "Immigration and Inequality," NBER Working Papers 14683, National Bureau of Economic Research, Inc.
  10. George J. Borjas & Lawrence F. Katz, 2005. "The Evolution of the Mexican-Born Workforce in the United States," NBER Working Papers 11281, National Bureau of Economic Research, Inc.
  11. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  12. Angrist, Joshua D, 1995. "The Economic Returns to Schooling in the West Bank and Gaza Strip," American Economic Review, American Economic Association, vol. 85(5), pages 1065-87, December.
  13. George J. Borjas, 2003. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1335-1374, November.
  14. George J. Borjas, 2006. "Native Internal Migration and the Labor Market Impact of Immigration," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
  15. Antonio Ciccone & Giovanni Peri, 2005. "Long-Run Substitutability Between More and Less Educated Workers: Evidence from U.S. States, 1950-1990," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 652-663, November.
  16. Grossman, Jean Baldwin, 1982. "The Substitutability of Natives and Immigrants in Production," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 596-603, November.
  17. Joseph G. Altonji & David Card, 1989. "The Effects of Immigration on the Labor Market Outcomes of Natives," NBER Working Papers 3123, National Bureau of Economic Research, Inc.
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Cited by:
  1. Giulia Faggio & Henry G. Overman, 2012. "The Effect of Public Sector Employment on Local Labour Markets," SERC Discussion Papers 0111, Spatial Economics Research Centre, LSE.

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