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Immigrants' Labor Supply and Exchange Rate Volatility

Author

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  • Arash Nekoei

Abstract

Are an immigrant's decisions affected in real time by her home country's economy? I examine this question by exploiting exchange rate variations as exogenous price shocks to immigrants' budget constraints. I find that in response to a 10 percent dollar appreciation, an immigrant decreases her earnings by 0.92 percent, mainly by reducing hours worked. The exchange rate effect is greater for recent immigrants, married immigrants with absent spouses, Mexicans close to the border, and immigrants from countries with higher remittance flows. A neoclassical interpretation of these findings suggests that the income effect exceeds the cross-substitution effect. Remittance targets offer an alternative explanation.

Suggested Citation

  • Arash Nekoei, 2013. "Immigrants' Labor Supply and Exchange Rate Volatility," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 144-164, October.
  • Handle: RePEc:aea:aejapp:v:5:y:2013:i:4:p:144-64
    Note: DOI: 10.1257/app.5.4.144
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    References listed on IDEAS

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    1. Blomquist, Sören & Selin, Håkan, 2010. "Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 878-889, December.
    2. Robert Gertner, 1993. "Game Shows and Economic Behavior: Risk-Taking on "Card Sharks"," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 507-521.
    3. Raj Chetty, 2006. "A New Method of Estimating Risk Aversion," American Economic Review, American Economic Association, vol. 96(5), pages 1821-1834, December.
    4. Metrick, Andrew, 1995. "A Natural Experiment in "Jeopardy!"," American Economic Review, American Economic Association, vol. 85(1), pages 240-253, March.
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    Citations

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    Cited by:

    1. Nguyen, Ha & Duncan, Alan, 2015. "Macroeconomic fluctuations in home countries and immigrants’ well-being: New evidence from Down Under," MPRA Paper 69593, University Library of Munich, Germany, revised Feb 2016.
    2. Nguyen, Ha Trong & Duncan, Alan S, 2017. "Exchange rate fluctuations and immigrants' labour market outcomes: New evidence from Australian household panel data," Journal of International Economics, Elsevier, vol. 105(C), pages 174-186.
    3. Akay, Alpaslan & Brausmann, Alexandra & Djajic, Slobodan & Kirdar, Murat G., 2018. "Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants," IZA Discussion Papers 11679, Institute of Labor Economics (IZA).
    4. Alpaslan Akay & Olivier Bargain & Klaus F. Zimmermann, 2017. "Home Sweet Home?: Macroeconomic Conditions in Home Countries and the Well-Being of Migrants," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 351-373.
    5. Joan Monras, 2015. "Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis," Sciences Po Economics Discussion Papers 2015-04, Sciences Po Departement of Economics.
    6. Akay, Alpaslan & Brausmann, Alexandra & Djajic, Slobodan & Kirdar, Murat G., 2018. "Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants," Working Papers in Economics 735, University of Gothenburg, Department of Economics.
    7. repec:eee:ememar:v:35:y:2018:i:c:p:111-119 is not listed on IDEAS
    8. Akhtar, Sharmin & Masih, Mansur, 2018. "Does asymmetry matter in the relationship between exchange rate and remittance? Evidence from a remittance recipient country based on ARDL and NARDL," MPRA Paper 91764, University Library of Munich, Germany.
    9. repec:eee:exehis:v:64:y:2017:i:c:p:37-52 is not listed on IDEAS
    10. Piera Bello, 2017. "Exchange rate fluctuations and border crossings: evidence from the Swiss-Italian border," IdEP Economic Papers 1701, USI Università della Svizzera italiana.
    11. Abarcar, Paolo, 2017. "The return motivations of legal permanent migrants: Evidence from exchange rate shocks and immigrants in Australia," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 62-77.
    12. Albert, Christoph & Monras, Joan, 2018. "Immigration and Spatial Equilibrium: the Role of Expenditures in the Country of Origin," CEPR Discussion Papers 12842, C.E.P.R. Discussion Papers.
    13. Merton, Robert C, 1978. "On the Cost of Deposit Insurance When There Are Surveillance Costs," The Journal of Business, University of Chicago Press, vol. 51(3), pages 439-452, July.

    More about this item

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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