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The Effect of Low-Skilled Immigration on U.S. Prices: Evidence from CPI Data

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  • Patricia Cortes

Abstract

I exploit the large variation across U.S. cities and through time in the relative size of the low-skilled immigrant population to estimate the causal effect of immigration on prices of nontraded goods and services. Using an instrumental variables strategy, I find that, at current immigration levels, a 10 percent increase in the share of low-skilled immigrants in the labor force decreases the price of immigrant-intensive services, such as housekeeping and gardening, by 2 percent. Wage equations suggest that lower wages are a likely channel through which these effects take place. However, wage effects are significantly larger for low-skilled immigrants than for low-skilled natives, implying that the two are imperfect substitutes. (c) 2008 by The University of Chicago. All rights reserved.

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  • Patricia Cortes, 2008. "The Effect of Low-Skilled Immigration on U.S. Prices: Evidence from CPI Data," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 381-422, June.
  • Handle: RePEc:ucp:jpolec:v:116:y:2008:i:3:p:381-422
    DOI: 10.1086/589756
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    1. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
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