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Labor Market Competition and the Assimilation of Immigrants

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  • Glitz, Albrecht
  • Albert, Christoph
  • Llull, Joan

Abstract

In this paper, we show that the wage assimilation of immigrants is the result of the intricate interplay between individual skill accumulation and dynamic equilibrium effects in the labor market. When immigrants and natives are imperfect substitutes, increasing immigrant inflows widen the wage gap between them. Using a simple production function framework, we show that this labor market competition channel can explain about one quarter of the large increase in the average immigrant-native wage gap in the United States between the 1960s and 1990s arrival cohorts. Once competition effects and compositional changes in education and region of origin are accounted for, we find that the unobservable skills of newly arriving immigrants increased over time rather than decreased as traditionally argued in the literature. We corroborate this finding by documenting closely matching patterns for immigrants' English language proficiency.

Suggested Citation

  • Glitz, Albrecht & Albert, Christoph & Llull, Joan, 2021. "Labor Market Competition and the Assimilation of Immigrants," CEPR Discussion Papers 16432, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16432
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    1. is not listed on IDEAS
    2. Silliman, Mikko & Willén, Alexander, 2024. "Worker Power, Immigrant Sorting, and Firm Dynamics," Discussion Paper Series in Economics 13/2024, Norwegian School of Economics, Department of Economics.
    3. Silke Anger & Jacopo Bassetto & Malte Sandner, 2024. "Lifting Barriers to Skill Transferability: Immigrant Integration through Occupational Recognition," Development Working Papers 498, Centro Studi Luca d'Agliano, University of Milano.
    4. Regina T. Riphahn & Irakli Sauer, 2024. "Earnings Assimilation of Post-Reunification East German Migrants in West Germany," CESifo Working Paper Series 11233, CESifo.
    5. Chassamboulli, Andri & Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro, 2024. "Immigration and labour market flows," Labour Economics, Elsevier, vol. 86(C).
    6. García-Suaza, Andrés & Gallego, Juan Miguel & Mayorga, Juan D. & Mondragón-Mayo, Angie & Sepúlveda, Carlos & Sarango Iturralde, Alexander, 2022. "COVID-19 and assimilation: an analysis of immigration from Venezuelan in Colombia," Working papers 99, Red Investigadores de Economía.
    7. Joan Llull, 2021. "Immigration and Gender Differences in the Labor Market," Journal of Human Capital, University of Chicago Press, vol. 15(1), pages 174-203.
    8. Arellano-Bover, Jaime & San, Shmuel, 2023. "The Role of Firms and Job Mobility in the Assimilation of Immigrants: Former Soviet Union Jews in Israel 1990–2019," IZA Discussion Papers 16389, Institute of Labor Economics (IZA).
    9. Paul Berbée & Jan Stuhler, 2025. "The integration of migrants in the German labour market: evidence over 50 years," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 40(122), pages 481-549.
    10. Christian Dustmann & Hyejin Ku & Tetyana Surovtseva, 2024. "Real Exchange Rates and the Earnings of Immigrants," The Economic Journal, Royal Economic Society, vol. 134(657), pages 271-294.
    11. Serdar Birinci & Fernando Leibovici & Kurt See, 2021. "The Allocation of Immigrant Talent: Macroeconomic Implications for the U.S. and Across Countries," Working Papers 2021-004, Federal Reserve Bank of St. Louis, revised 16 Jun 2025.
    12. Lucchetti, Gabriele & Ruggieri, Alessandro, 2025. "Unlucky migrants: Scarring effect of recessions on the assimilation of the foreign born," Labour Economics, Elsevier, vol. 92(C).
    13. Serdar Birinci & Fernando Leibovici & Kurt See, 2021. "Immigrant Misallocation," LIS Working papers 809, LIS Cross-National Data Center in Luxembourg.
    14. Illing, Hannah & Koch, Theresa, 2021. "Who Suffers the Greatest Loss? Costs of Job Displacement for Migrants and Natives," IAB-Discussion Paper 202108, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    15. Glitz, Albrecht & Rapoport, Hillel, 2024. "Introduction to the Labour Economics special issue on immigration economics," Labour Economics, Elsevier, vol. 87(C).
    16. Bonin Holger & Rinne Ulf, 2025. "Aktive Arbeitsmarktpolitik hat Integration der Geflüchteten nachhaltig verbessert," Wirtschaftsdienst, Sciendo, vol. 105(9), pages 622-627.

    More about this item

    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • 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

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