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

  • Peri, Giovanni

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.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 84 (2011)
Issue (Month): 1 (May)
Pages: 1-14

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Handle: RePEc:eee:inecon:v:84:y:2011:i:1:p:1-14
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. David Card & Ethan G. Lewis, 2005. "The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts," NBER Working Papers 11552, National Bureau of Economic Research, Inc.
  2. David Card, 2009. "Immigration and Inequality," American Economic Review, American Economic Association, vol. 99(2), pages 1-21, May.
  3. 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, 01.
  4. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc.
  5. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
  6. David Card, 1997. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," NBER Working Papers 5927, National Bureau of Economic Research, Inc.
  7. 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.
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  9. Giovanni Peri & Chad Sparber, 2009. "Task Specialization, Immigration and Wages," Working Papers 91, University of California, Davis, Department of Economics.
  10. 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.
  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. David Card & John E. DiNardo, 2000. "Do Immigrant Inflows Lead to Native Outflows?," NBER Working Papers 7578, National Bureau of Economic Research, Inc.
  13. 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).
  14. 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.
  15. 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.
  16. 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.
  17. George J. Borjas & Jeffrey Grogger & Gordon H. Hanson, 2008. "Imperfect Substitution between Immigrants and Natives: A Reappraisal," NBER Working Papers 13887, National Bureau of Economic Research, Inc.
  18. 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.
  19. 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.
  20. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
  21. 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 S65-97, October.
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