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Instrumental Variables and Omitted Migrant Flows: Immigration and Emigration in Peru

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  • Díaz Rivera, Orlando Ángel

Abstract

Instrumental variables are often used to identify the causal effect of immigration on labor market outcomes of natives. In this paper, I investigate the sensitivity of 2SLS estimators in the (common) case where a simultaneous shock occurs to the unit of interest and we do not explicitly account for it. For this purpose, I estimate the effects of both the Venezuelan immigration shock and the Peruvian emigration during the last decades on the labor market outcomes of Peruvian native stayers. Using shift-share instruments, I document positive effects of both immigration and emigration on employment rates, household income, and household expenditure (with emigration effects being about eight times larger). Reassuringly for the literature, even in a context of instruments correlated with the omitted flow the point estimates are shown to be robust to the inclusion of the omitted variable.

Suggested Citation

  • Díaz Rivera, Orlando Ángel, 2025. "Instrumental Variables and Omitted Migrant Flows: Immigration and Emigration in Peru," UC3M Working papers. Economics 47870, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:47870
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    1. George J. Borjas, 2021. "Native Internal Migration and the Labor Market Impact of Immigration," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 10, pages 275-312, World Scientific Publishing Co. Pte. Ltd..
    2. 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.
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