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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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    1. 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.
    2. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
    3. 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.
    4. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    5. John DiNardo & David Card, 2000. "Do Immigrant Inflows Lead to Native Outflows?," American Economic Review, American Economic Association, vol. 90(2), pages 360-367, May.
    6. David Card, 1990. "The Impact of the Mariel Boatlift on the Miami Labor Market," ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
    7. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
    8. Giovanni Peri & Chad Sparber, 2016. "Task Specialization, Immigration, and Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 3, pages 81-115 World Scientific Publishing Co. Pte. Ltd..
    9. 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.
    10. David Card, 2009. "Immigration and Inequality," CReAM Discussion Paper Series 0907, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    11. George J. Borjas & Lawrence F. Katz, 2007. "The Evolution of the Mexican-Born Workforce in the United States," NBER Chapters,in: Mexican Immigration to the United States, pages 13-56 National Bureau of Economic Research, Inc.
    12. 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.
    13. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
    14. Gordon H. Hanson & Craig McIntosh, 2009. "The Demography of Mexican Migration to the United States," American Economic Review, American Economic Association, vol. 99(2), pages 22-27, May.
    15. 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).
    16. Abdurrahman Aydemir & George J. Borjas, 2011. "Attenuation Bias in Measuring the Wage Impact of Immigration," Journal of Labor Economics, University of Chicago Press, vol. 29(1), pages 69-113, January.
    17. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
    18. Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 65-97, October.
    19. 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.
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    21. 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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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. repec:spr:anresc:v:60:y:2018:i:1:d:10.1007_s00168-017-0848-z is not listed on IDEAS
    7. 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.
    8. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, Elsevier.
    9. repec:wsi:wschap:9789814719902_0006 is not listed on IDEAS
    10. 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.
    11. repec:ipg:wpaper:2014-071 is not listed on IDEAS
    12. Morin, Louis-Philippe, 2015. "Cohort size and youth earnings: Evidence from a quasi-experiment," Labour Economics, Elsevier, vol. 32(C), pages 99-111.
    13. Djajic, S. & Mesnard, A., 2013. "Guest Workers in the Underground Economy," Working Papers 13/05, Department of Economics, City University London.
    14. Tiago Freire & Xiaoye Li, 2013. "How Immigration Reduced Social Capital in the US: 2005-2011," ERSA conference papers ersa13p1285, European Regional Science Association.
    15. 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.
    16. 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.
    17. 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.
    18. 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..
    19. 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.
    20. 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.
    21. Slobodan Djajić & Alice Mesnard, 2013. "Guest Workers in the Underground Economy," IHEID Working Papers 15-2013, Economics Section, The Graduate Institute of International Studies.
    22. Christoph Basten & Michael Siegenthaler, 2013. "Do immigrants take or create residents' jobs?," KOF Working papers 13-335, KOF Swiss Economic Institute, ETH Zurich.

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