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Occupational Barriers and the Labor Market Penalty from Lack of Legal Status

Author

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  • Ortega, Francesc

    () (Queens College, CUNY)

  • Hsin, Amy

    () (Queens College, CUNY)

Abstract

Wage gaps between documented (including natives) and undocumented workers may reflect employer exploitation, endogenous occupational sorting and productivity losses associated with lack of legal status. Identification of the undocumented productivity penalty is crucial to estimate the aggregate economic gains from legalization. This paper presents a new identification strategy based on the interplay between educational attainment and occupational barriers. Our main finding is that lack of legal status reduces the productivity of undocumented workers by about 12%. We also find that Dreamers are positively selected compared to similarly skilled natives, as one would expect if they face occupational barriers (Hsieh et al., 2013). Our estimates also imply that the degree of employer exploitation is likely to be small, suggesting that employer competition bids up the wages of undocumented workers and aligns them with their productivity. Last, we also find evidence suggesting that the occupational choices of undocumented workers are heavily influenced by licensing requirements and by the degree of exposure to apprehension by immigration enforcement agencies. In sum, our results strongly suggest that occupational barriers associated with lack of legal status lead to misallocation of talent and negatively affect economic growth.

Suggested Citation

  • Ortega, Francesc & Hsin, Amy, 2018. "Occupational Barriers and the Labor Market Penalty from Lack of Legal Status," IZA Discussion Papers 11680, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11680
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    References listed on IDEAS

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    1. Giovanni Peri & Chad Sparber, 2016. "Task Specialization, Immigration, and Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 3, pages 81-115 World Scientific Publishing Co. Pte. Ltd..
    2. Matthew Hall & Emily Greenman, 2015. "The Occupational Cost of Being Illegal in the United States: Legal Status, Job Hazards, and Compensating Differentials," International Migration Review, Wiley Blackwell, vol. 49(2), pages 406-442, June.
    3. Hoyt Bleakley & Aimee Chin, 2010. "Age at Arrival, English Proficiency, and Social Assimilation among US Immigrants," American Economic Journal: Applied Economics, American Economic Association, vol. 2(1), pages 165-192, January.
    4. Catalina Amuedo-Dorantes & Francisca Antman, 2017. "Schooling and labor market effects of temporary authorization: evidence from DACA," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(1), pages 339-373, January.
    5. Dylan Conger & Colin C. Chellman, 2013. "Undocumented College Students in the United States: In-State Tuition Not Enough to Ensure Four-Year Degree Completion," Education Finance and Policy, MIT Press, vol. 8(3), pages 364-377, July.
    6. Chiswick, Barry R, 1991. "Speaking, Reading, and Earnings among Low-Skilled Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 149-170, April.
    7. Barry Chiswick & Yew Lee & Paul Miller, 2005. "Family matters: the role of the family in immigrants' destination language acquisition," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(4), pages 631-647, November.
    8. repec:eee:socmed:v:199:y:2018:i:c:p:39-48 is not listed on IDEAS
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    More about this item

    Keywords

    migration; undocumented; legalization; amnesty; dreamers;

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • 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

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