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The Effects of Immigration on U.S. Wages and Rents: A General Equilibrium Approach

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  • Gianmarco I.P. Ottaviano

    () (University of Bologna, FEEM and CEPR)

  • Giovanni Peri

    () (UC Davis and NBER)

Abstract

In this paper we document a strong positive correlation of immigration flows with changes in average wages and average house rents for native residents across U.S. states. Instrumental variables estimates reveal that the correlations are compatible with a causal interpretation from immigration to wages and rents of natives. Separating the effects of immigrants on natives of different schooling levels we find positive effects on the wages and rents of highly educated and small effects on the wages (negative) and rents (positive) of less educated. We propose a model where natives and immigrants of three different education levels interact in production in a central district and live in the surrounding region. In equilibrium the inflow of immigrants has a positive productive effect on natives due to complementarities in production as well as a positive competition effect on rents. The model calibrated and simulated with U.S.-states data matches most of the estimated effects of immigrants on wages and rents of natives in the period 1990-2005. This validation suggests the proposed model as a useful tool to evaluate the impacts of alternative immigration scenarios on U.S. wages and rents.

Suggested Citation

  • Gianmarco I.P. Ottaviano & Giovanni Peri, 2007. "The Effects of Immigration on U.S. Wages and Rents: A General Equilibrium Approach," CReAM Discussion Paper Series 0713, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  • Handle: RePEc:crm:wpaper:0713
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Libertad Gonzalez & Francesc Ortega, 2013. "Immigration And Housing Booms: Evidence From Spain," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 37-59, February.
    3. Adriana Kugler & Mutlu Yuksel, 2008. "Effects of Low-Skilled Immigration on U.S. Natives: Evidence from Hurricane Mitch," NBER Working Papers 14293, National Bureau of Economic Research, Inc.
    4. Michael Gerfin & Boris Kaiser, 2010. "The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(IV), pages 709-739, December.
    5. Todd Schoellman, 2010. "The Occupations and Human Capital of U.S. Immigrants," Journal of Human Capital, University of Chicago Press, vol. 4(1), pages 1-34.
    6. Lucht, Michael & Haas, Anette, 2012. "Heterogeneous Firms and Substitution by Tasks: the Productivity Effect of Migrants," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62053, Verein für Socialpolitik / German Economic Association.
    7. Kathrin Degen & Andreas M. Fischer, 2017. "Immigration and Swiss House Prices," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 153(1), pages 15-36, January.
    8. Giovanni Peri & Chad Sparber, 2016. "Task Specialization, Immigration, and Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 3, pages 81-115 World Scientific Publishing Co. Pte. Ltd..
    9. Cobb-Clark, Deborah A. & Sinning, Mathias G., 2011. "Neighborhood diversity and the appreciation of native- and immigrant-owned homes," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 214-226, May.
    10. Fischer, Andreas M., 2012. "Immigrant language barriers and house prices," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 389-395.
    11. Giovanni Peri & Chad Sparber, 2011. "Highly Educated Immigrants and Native Occupational Choice," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(3), pages 385-411, July.
    12. Füss, Roland & Zietz, Joachim, 2016. "The economic drivers of differences in house price inflation rates across MSAs," Journal of Housing Economics, Elsevier, vol. 31(C), pages 35-53.
    13. Steven Stillman & David C. Maré, 2008. "Housing Markets and Migration: Evidence from New Zealand," Working Papers 08_06, Motu Economic and Public Policy Research.
    14. Sa, Filipa, 2011. "Immigration and House Prices in the UK," IZA Discussion Papers 5893, Institute for the Study of Labor (IZA).
    15. Sanchis-Guarner, Rosa, 2014. "First-come first-served: identifying the demand effect of immigration inflows on house prices," LSE Research Online Documents on Economics 58341, London School of Economics and Political Science, LSE Library.
    16. Ottaviano, Gianmarco I.P. & Peri, Giovanni, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," Knowledge, Technology, Human Capital Working Papers 44227, Fondazione Eni Enrico Mattei (FEEM).
    17. Francesca Mazzolari & David Neumark, 2012. "Immigration and product diversity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 1107-1137, July.
    18. Christian Dustmann & Tommaso Frattini & Ian P. Preston, 2013. "The Effect of Immigration along the Distribution of Wages," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 145-173.
    19. Anette Haas & Michael Lucht & Norbert Schanne, 2012. "Why to employ both migrants and natives? A study on task-specific substitutability," Norface Discussion Paper Series 2012026, Norface Research Programme on Migration, Department of Economics, University College London.
    20. Dhimitri Qirjo, 2015. "Monitoring, endogenous comparative advantage, and immigration," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-22, December.
    21. Nathan, Max, 2011. "The long term impacts of migration in British cities: diversity, wages, employment and prices," LSE Research Online Documents on Economics 33577, London School of Economics and Political Science, LSE Library.
    22. Kürschner, Kathleen, 2017. "Immigration and Rental Prices of Residential Housing: Evidence from the Fall of the Berlin Wall," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168092, Verein für Socialpolitik / German Economic Association.
    23. Anette Haas & Michael Lucht, 2013. "Heterogeneous Firms and Imperfect Substitution: The Productivity Effect of Migrants," Norface Discussion Paper Series 2013019, Norface Research Programme on Migration, Department of Economics, University College London.
    24. Mussa, Abeba & Nwaogu, Uwaoma G. & Pozo, Susan, 2017. "Immigration and housing: A spatial econometric analysis," Journal of Housing Economics, Elsevier, vol. 35(C), pages 13-25.
    25. Mazzolari, Francesca & Numark, David, 2009. "The Effects of Immigration on the Scale and Composition of Demand: A study of California establishments," MPRA Paper 19217, University Library of Munich, Germany.

    More about this item

    Keywords

    Wages; Rents; Housing Prices; U.S. States;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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