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The Labor Market Impact of Undocumented Immigrants: Job Creation vs. Job Competition

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  • Christoph Albert

Abstract

This paper studies the labor market impact of documented and undocumented immigration in a model with search frictions and non-random hiring. Since they accept lower wages, firms obtain a higher match surplus from hiring immigrants rather than natives. Therefore, immigration results in the creation of additional jobs but also generates more job competition. Whether job creation or competition is the dominating effect depends on the size of the induced fall in expected wages paid by firms. Using US data, I show in my empirical analysis that among low-skilled workers undocumented immigrants earn 8% less and have a 7 pp higher job finding rate than documented immigrants. Parameterizing the model based on these estimates, I find that the job creation effect of undocumented immigration dominates its job competition effect and leads to gains in terms of both employment and wages for native workers. In contrast, documented immigration leads to a fall in natives’ employment due to its weaker job creation effect. A policy of stricter immigration enforcement, simulated by a rise in the deportation rate of undocumented workers, decreases firms’ expected match surplus, mutes job creation and thus raises the unemployment rates of all workers.

Suggested Citation

  • Christoph Albert, 2017. "The Labor Market Impact of Undocumented Immigrants: Job Creation vs. Job Competition," CESifo Working Paper Series 6575, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6575
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp6575.pdf
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, November.
    2. Joan Llull, 2012. "Immigration, Wages, and Education: a Labor Market Equilibrium Structural Model," 2012 Meeting Papers 366, Society for Economic Dynamics.
    3. 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.
    4. Amuedo-Dorantes, Catalina & Bansak, Cynthia, 2011. "The Impact of Amnesty on Labor Market Outcomes: A Panel Study Using the Legalized Population Survey," IZA Discussion Papers 5576, Institute for the Study of Labor (IZA).
    5. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    6. Michael Good, 2013. "Do immigrant outflows lead to native inflows? An empirical analysis of the migratory responses to US state immigration legislation," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4275-4297, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    wage gap; migrant workers; hiring; employment;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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