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Examining the Labor Market Consequences of Endogenous Low-skill Migration with a Market-based Immigration Policy

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  • Marquez Alcala, German A.

Abstract

The undocumented migration of Mexican nationals to the U.S. is largely influenced by the availability of labor demand in unskilled sectors in the U.S., making it more efficient than the legal channels of migration available to unskilled Mexican nationals. Labor demand in unskilled industries is larger than the available unskilled labor in the U.S., but Mexican migrants, who constitute the majority share of foreign-born individuals in the U.S., are immigrating at the lowest rates in modern times, with net Mexican migration at approximately zero. This paper simulates a market-based immigration system for Mexican nationals, with a focus on the partial equilibrium effects in long run supply and demand for undocumented Mexican migrant labor in the U.S. agriculture sector. Reducing the additive tax on Mexican wages in the model effectively simulates an immigration policy shift. I estimate the net-of-tax long run labor supply and demand curves for U.S. agriculture, simulating an open-border policy with Mexico. Eliminating the additive tax on Mexican wages (which represents immigration policy reform) increases the quantity of labor used in U.S. agriculture, decreases U.S. agriculture wages for Mexican migrants, and raises Mexican agriculture wages. Since the labor supply curve for Mexican nationals is extremely elastic, the largest benefits of an immigration policy shift go to the U.S. producers, who can use higher labor inputs in production to lower the price of production. The results of the experiments are very similar, even with large differences in the visa pricing scheme chosen; this represents an exciting finding: the demand for access to the U.S. unskilled labor market for Mexican nationals is inelastic, which explains the fact that migrant smuggler costs have increased from approximately $50 in 1990 to upwards of $5,000 in the mid-2010s.

Suggested Citation

  • Marquez Alcala, German A., 2016. "Examining the Labor Market Consequences of Endogenous Low-skill Migration with a Market-based Immigration Policy," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236275, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea16:236275
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    File URL: http://ageconsearch.umn.edu/record/236275/files/German%20A%20Marquez%20Alcala_AAEA%20Selected%20Paper%20for%202016%20Annual%20Meeting.pdf
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    References listed on IDEAS

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    1. Baldos, Uris Lantz & Thomas Hertel, 2012. "SIMPLE: a Simplified International Model of agricultural Prices, Land use and the Environment," GTAP Working Papers 4021, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    2. Gordon H. Hanson, 2006. "Illegal Migration from Mexico to the United States," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 869-924, December.
    3. Guan, Shengfei & Wu, Feng & Roka, Fritz & Whidden, Alicia, 2015. "Agricultural Labor and Immigration Reform," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 0(Issue 4), pages 1-9.
    4. J. Edward Taylor1 & Stephen R. Boucher & Aaron Smith & Peri L. Fletcher & Antonio Yúnez-Naude, 2012. "Immigration and the US farm labour supply," Migration Letters, Transnational Press London, UK, vol. 9(1), pages 87-99, January.
    5. Espey, Molly & Thilmany, Dawn D., 2000. "Farm Labor Demand: A Meta-Regression Analysis Of Wage Elasticities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 1), pages 1-15, July.
    6. Andrés Villarreal, 2014. "Explaining the Decline in Mexico-U.S. Migration: The Effect of the Great Recession," Demography, Springer;Population Association of America (PAA), vol. 51(6), pages 2203-2228, December.
    7. Wayne A. Cornelius, 2001. "Death at the Border: Efficacy and Unintended Consequences of US Immigration Control Policy," Population and Development Review, The Population Council, Inc., vol. 27(4), pages 661-685.
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    Keywords

    Agricultural and Food Policy; International Relations/Trade; Labor and Human Capital; Political Economy;

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