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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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  • Giovanni Peri, 2010. "Rethinking the Area Approach: Immigrants and the Labor Market in California, 1960-2005," NBER Working Papers 16217, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16217
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    Cited by:

    1. Faggio, Giulia & Overman, Henry, 2014. "The effect of public sector employment on local labour markets," Journal of Urban Economics, Elsevier, vol. 79(C), pages 91-107.
    2. Peri, Giovanni & Sparber, Chad, 2011. "Assessing inherent model bias: An application to native displacement in response to immigration," Journal of Urban Economics, Elsevier, vol. 69(1), pages 82-91, January.

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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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