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Rethinking the area approach: Immigrants and the labor market in California

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  • Peri, Giovanni

Abstract

A framework that uses a Constant Elasticity of Substitution (CES) production function with skill differentiation and integrated national labor markets has predictions for the employment effect of immigrants at the local level. The employment (rather than wage) response to immigration by skill in a state reveals the production substitutability-complementarity between native and immigrant labor. This, in turn, reveals the degree to which immigrants stimulate or depress the demand for native labor. To estimate this elasticity, I 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 these 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 explains the counter-intuitive fact that there is a zero correlation between immigration and wage and employment outcomes of natives in the state.

Suggested Citation

  • Peri, Giovanni, 2011. "Rethinking the area approach: Immigrants and the labor market in California," Journal of International Economics, Elsevier, vol. 84(1), pages 1-14, May.
  • Handle: RePEc:eee:inecon:v:84:y:2011:i:1:p:1-14
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sari Pekkala Kerr & William R. Kerr & William F. Lincoln, 2015. "Skilled Immigration and the Employment Structures of US Firms," Journal of Labor Economics, University of Chicago Press, vol. 33(S1), pages 147-186.
    2. Eliane El Badaoui & Eric Strobl & Frank Walsh, 2014. "The Impact of Internal Migration on Local Labour Markets in Thailand," Working Papers 2014-71, Department of Research, Ipag Business School.
    3. David de la Croix & Frederic Docquier, 2015. "An Incentive Mechanism to Break the Low-skill Immigration Deadlock," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 593-618, July.
    4. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, Elsevier.
    5. Jaeger, David A & Ruist, Joakim & Stuhler, Jan, 2018. "Shift-Share Instruments and the Impact of Immigration," CEPR Discussion Papers 12701, C.E.P.R. Discussion Papers.
    6. Slobodan Djajic & Alice Mesnard, 2013. "Guest Workers in the Underground Economy," CReAM Discussion Paper Series 1324, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    7. Morin, Louis-Philippe, 2015. "Cohort size and youth earnings: Evidence from a quasi-experiment," Labour Economics, Elsevier, vol. 32(C), pages 99-111.
    8. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2017. "Illegal immigration and the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1050-1080, December.
    9. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2018. "Dealing with Illegal Immigration: the Role of Informality, Taxation and Trade," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2018007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Frédéric Docquier & Çağlar Ozden & Giovanni Peri, 2016. "The Labour Market Effects Of Immigration And Emigration In Oecd Countries," World Scientific Book Chapters,in: The Economics of International Migration, chapter 6, pages 187-226 World Scientific Publishing Co. Pte. Ltd..
    11. 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.
    12. 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.
    13. Freire, Tiago & Li, Xiaoye, 2013. "How Immigration Reduced Social Capital in the US: 2005-2011," MPRA Paper 44540, University Library of Munich, Germany.
    14. Slobodan Djajić & Alice Mesnard, 2013. "Guest Workers in the Underground Economy," IHEID Working Papers 15-2013, Economics Section, The Graduate Institute of International Studies.
    15. Blake Sisk & Carl Bankston, 2014. "Hurricane Katrina, a Construction Boom, and a New Labor Force: Latino Immigrants and the New Orleans Construction Industry, 2000 and 2006–2010," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 33(3), pages 309-334, June.
    16. Tiago Freire, 2015. "City of God Redux: Inequality, Migration, and Violent Crime in Brazil between 1980 and 2000," ERSA conference papers ersa15p658, European Regional Science Association.
    17. Luca Marchiori & Patrice Pieretti & Benteng Zou, 2014. "Immigration, occupational choice and public employment," CREA Discussion Paper Series 14-15, Center for Research in Economic Analysis, University of Luxembourg.
    18. Christoph Basten & Michael Siegenthaler, 2013. "Do immigrants take or create residents' jobs?," KOF Working papers 13-335, KOF Swiss Economic Institute, ETH Zurich.
    19. repec:spr:anresc:v:60:y:2018:i:1:d:10.1007_s00168-017-0848-z is not listed on IDEAS
    20. repec:ipg:wpaper:2014-071 is not listed on IDEAS
    21. Djajic, S. & Mesnard, A., 2013. "Guest Workers in the Underground Economy," Working Papers 13/05, Department of Economics, City University London.
    22. Jens Ruhose, 2015. "Microeconometric Analyses on Economic Consequences of Selective Migration," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 61, January.
    23. Siegenthaler, Michael & Basten, Christoph, 2013. "Do immigrants take or create residents jobs? Quasi-experimental evidence from Switzerland," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79780, Verein für Socialpolitik / German Economic Association.

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