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Immigration and Inequality

  • David Card

    ()

    (University of California Berkeley)

Immigration is often viewed as a proximate cause of the rising wage gap between high- and low-skilled workers. Nevertheless, there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect, and over the precise magnitudes involved. This paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality, focusing on evidence from cross-city comparisons in the U.S. While some researchers have claimed that a cross-city research design is inherently flawed, I argue that the evidence from cross-city comparisons is remarkably consistent with recent findings based on aggregate time series data. In particular, cross-city and aggregate time series comparisons provide support for three key conclusions: (1) workers with below high school education are perfect substitutes for those with a high school education; (2) "high school equivalent" and "college equivalent" workers are imperfect substitutes, with an elasticity of substitution on the order of 2; (3) within education groups, immigrants and natives are imperfect substitutes. Together these results imply that the average impacts of recent immigrant inflows on the relative wages of U.S. natives are small. The effects on overall wage inequality (including natives and immigrants) are larger, reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives. Even so, immigration accounts for a small share (5%) of the increase in U.S. wage inequality between 1980 and 2000.

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Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number 0907.

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Date of creation: Jan 2009
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Handle: RePEc:crm:wpaper:0907
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  1. David Card & Ethan Lewis, 2005. "The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts," CReAM Discussion Paper Series 0504, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  2. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
  3. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2006. "The Impact of Immigration on the Structure of Male Wages: Theory and Evidence from Britain," CEP Discussion Papers dp0754, Centre for Economic Performance, LSE.
  4. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  5. George J. Borjas, 1987. "Immigrants, minorities, and labor market competition," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 40(3), pages 382-392, April.
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  7. Gordon Dahl, 1997. "Mobility and the Returns to Education: Testing A Roy Model With Multiple Markets," Working Papers 760, Princeton University, Department of Economics, Industrial Relations Section..
  8. Grossman, Jean Baldwin, 1982. "The Substitutability of Natives and Immigrants in Production," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 596-603, November.
  9. George J. Borjas & Lawrence F. Katz, 2005. "The Evolution of the Mexican-Born Workforce in the United States," NBER Working Papers 11281, National Bureau of Economic Research, Inc.
  10. Fisher, Franklin M & Solow, Robert M & Kearl, James M, 1977. "Aggregate Production Functions: Some CES Experiments," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 305-20, June.
  11. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  12. Ottaviano, Gianmarco I. P. & Peri, Giovanni, 2007. "Rethinking the effects of immigration on wages," HWWI Research Papers 3-8, Hamburg Institute of International Economics (HWWI).
  13. David Card, 2005. "Is the New Immigration Really so Bad?," Economic Journal, Royal Economic Society, vol. 115(507), pages F300-F323, November.
  14. Gianmarco I.P. Ottaviano & Giovanni Peri, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," NBER Working Papers 14188, National Bureau of Economic Research, Inc.
  15. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
  16. Thomas Lemieux, 2008. "The changing nature of wage inequality," Journal of Population Economics, Springer, vol. 21(1), pages 21-48, January.
  17. Enrico Moretti, 2002. "Estimating the Social Return to Higher Education: Evidence From Longitudinal and Repeated Cross-Sectional Data," NBER Working Papers 9108, National Bureau of Economic Research, Inc.
  18. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  19. Peter Kuhn & Ian Wooton, 1991. "Immigration, International Trade, and the Wages of Native Workers," NBER Chapters, in: Immigration, Trade, and the Labor Market, pages 285-304 National Bureau of Economic Research, Inc.
  20. George J. Borjas & Jeffrey Grogger & Gordon H. Hanson, 2008. "Imperfect Substitution between Immigrants and Natives: A Reappraisal," NBER Working Papers 13887, National Bureau of Economic Research, Inc.
  21. Manacorda, Marco & Manning, Alan & Wadsworth, Jonathan, 2010. "The Impact of Immigration on the Structure of Wages: Theory and Evidence from Britain," CEPR Discussion Papers 7888, C.E.P.R. Discussion Papers.
  22. Ethan Lewis, 2003. "Local, open economies within the U.S.: how do industries respond to immigration?," Working Papers 04-1, Federal Reserve Bank of Philadelphia.
  23. David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 157-205, February.
  24. Christian Dustmann & Tommaso Frattini & Ian Preston, 2008. "The Effect of Immigration along the Distribution of Wages," CReAM Discussion Paper Series 0803, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  25. Ethan Lewis, 2004. "How did the Miami labor market absorb the Mariel immigrants?," Working Papers 04-3, Federal Reserve Bank of Philadelphia.
  26. Fisher, Franklin M, 1969. "The Existence of Aggregate Production Functions," Econometrica, Econometric Society, vol. 37(4), pages 553-77, October.
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