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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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    1. Joan Llull, 2018. "Immigration, Wages, and Education: A Labour Market Equilibrium Structural Model," Review of Economic Studies, Oxford University Press, vol. 85(3), pages 1852-1896.
    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.
    3. Mette Foged & Giovanni Peri, 2016. "Immigrants' Effect on Native Workers: New Analysis on Longitudinal Data," American Economic Journal: Applied Economics, American Economic Association, vol. 8(2), pages 1-34, April.
    4. Patricia Cortes, 2008. "The Effect of Low-Skilled Immigration on U.S. Prices: Evidence from CPI Data," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 381-422, June.
    5. Joan Monras, 2020. "Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis," Journal of Political Economy, University of Chicago Press, vol. 128(8), pages 3017-3089.
    6. Suphanit Piyapromdee, 2017. "The Impact of Immigration on Wages, Internal Migration and Welfare," PIER Discussion Papers 69, Puey Ungphakorn Institute for Economic Research.
    7. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
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    9. Anthony Edo, 2017. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," Working Papers 2017-13, CEPII research center.
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    11. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
    12. Damoun Ashournia, 2018. "Labour Market Effects of International Trade When Mobility is Costly," Economic Journal, Royal Economic Society, vol. 128(616), pages 3008-3038, December.
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    14. Lutz Hendricks & Todd Schoellman, 2018. "Human Capital and Development Accounting: New Evidence from Wage Gains at Migration," The Quarterly Journal of Economics, Oxford University Press, vol. 133(2), pages 665-700.
    15. Kambourov, Gueorgui & Manovskii, Iourii, 2013. "A Cautionary Note On Using (March) Current Population Survey And Panel Study Of Income Dynamics Data To Study Worker Mobility," Macroeconomic Dynamics, Cambridge University Press, vol. 17(1), pages 172-194, January.
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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).

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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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