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Dynamic Responses to Immigration

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  • Mark Colas

Abstract

I analyze the dynamic effects of immigration by estimating an equilibrium model of local labor markets in the US. The model includes firms in multiple cities and sectors which combine capital, skilled and unskilled labor in production, and forward-looking workers who choose their sector and location each period as a dynamic discrete choice. A counterfactual unskilled immigration inflow leads to an initial wage drop for unskilled workers and a wage increase for skilled workers. These effects dissipate rapidly as unskilled workers migrate away from heavily affected cities and workers shift toward unskilled intensive industries. Effects on lifetime utility are small.

Suggested Citation

  • Mark Colas, 2018. "Dynamic Responses to Immigration," Opportunity and Inclusive Growth Institute Working Papers 6, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmoi:0006
    DOI: 10.21034/iwp.6
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    References listed on IDEAS

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    Cited by:

    1. Braun, Sebastian Till & Weber, Henning, 2021. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Journal of International Economics, Elsevier, vol. 129(C).
    2. Ryan Kim & Jonathan Vogel, 2020. "Trade and Welfare (Across Local Labor Markets)," NBER Working Papers 27133, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Immigration; Labor market dynamics; Local labor markets;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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