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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 of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11680
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    References listed on IDEAS

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    Cited by:

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    2. Jackline Wahba & Nelly El-Mallakh, 2017. "Return Migrants and the Wage Premium: Does the Legal Status of Migrants Matter?," Working Papers 1133, Economic Research Forum, revised 08 2017.

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    More about this item

    Keywords

    migration; undocumented; legalization; amnesty; dreamers;
    All these keywords.

    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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