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The Allocation of Immigrant Talent: Macroeconomic Implications for the U.S. and Across Countries

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Abstract

We quantify the barriers to the economic integration of immigrants using an occupational choice model with natives and immigrants of multiple types subject to wedges that distort their allocations. We show that key parameters, including wedges, can be estimated to match the distribution of employment and earnings across individuals and occupations. We find sizable output gains from removing immigrant wedges in the U.S., accounting for 7 percent of immigrants' overall economic contribution. These gains arise from increased labor force participation and from reallocation from manual toward cognitive jobs. We show that the model-implied elasticities are consistent with empirical estimates and that immigrant wedges affect the impact of alternative immigration policies. Finally, we use harmonized microdata across 19 economies and find substantial cross-country differences in the estimated immigrant wedges. Differences in immigrant labor force participation and the correlation between wedges and productivities account for the heterogeneous gains from removing the wedges.

Suggested Citation

  • 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 Jun 2022.
  • Handle: RePEc:fip:fedlwp:90705
    DOI: 10.20955/wp.2021.004
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    Cited by:

    1. Andrej Cupák & Pavel Ciaian & d'Artis Kancs, 2021. "Comparing the immigrant-native pay gap: A novel evidence from home and host countries," EERI Research Paper Series EERI RP 2021/05, Economics and Econometrics Research Institute (EERI), Brussels.

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    More about this item

    Keywords

    Immigration; Occupational Barriers; Mobility; Misallocation;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • 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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