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The Dynamic Impact of Immigration on Natives' Labor Market Outcomes: Evidence from Israel

  • Cohen Goldner, Sarit

    ()

    (Bar-Ilan University)

  • Paserman, M. Daniele

    ()

    (Boston University)

This paper studies the dynamic impact of mass migration from the Former Soviet Union to Israel on natives’ labor market outcomes. Specifically, we attempt to distinguish between the short-run and long-run effects of immigrants on natives’ wages and employment. The transition of immigrants into a new labor market is a gradual process: the dynamics of this process come from immigrants’ occupational mobility and from adjustments by local factors of production. Natives may therefore face changing labor market conditions, even years after the arrival of the immigrants. If immigrants are relatively good substitutes for native workers, we expect that the impact of immigration will be largest immediately upon the immigrants’ arrival, and may become smaller as the labor market adjusts to the supply shock. Conversely, if immigrants upon arrival are poor substitutes for natives because of their lack of local human capital, the initial effect of immigration is small, and the effect increases as immigrants acquire local labor market skills and compete with native workers. We empirically examine these alternative hypotheses using data from Israel’s Labor Force and Income Surveys from 1989 to 1999. We find that wages of both men and women are negatively correlated with the fraction of immigrants with little local experience in a given labor market segment. A 10 percent increase in the share of immigrants lowers natives’ wages in the short run by 1 to 3 percent, but this effect dissolves after 4 to 7 years. This result is robust to a variety of different segmentations of the labor market, to the inclusion of cohort effects, and to different dynamic structures in the residual term of the wage equation. On the other hand, we do not find any effect of immigration on employment, neither in the short nor in the long run.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1315.

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Length: 41 pages
Date of creation: Sep 2004
Date of revision:
Publication status: published in: European Economic Review, 2011, 55 (8), 1027-1045
Handle: RePEc:iza:izadps:dp1315
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  1. Adriana Kugler & Robert Sauer, 2002. "Doctors without borders: The returns to an occupational license for Soviet immigrant physicians in Israel," Economics Working Papers 648, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Yoram Weiss & Robert M. Sauer & Menachem Gotlibovski, 2003. "Immigration, Search, and Loss of Skill," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 557-592, July.
  3. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc.
  4. Cohen-Goldner, Sarit & Paserman, M. Daniele, 2004. "The Dynamic Impact of Immigration on Natives' Labour Market Outcomes: Evidence from Israel," CEPR Discussion Papers 4640, C.E.P.R. Discussion Papers.
  5. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
  6. Sarit Cohen-Goldner & M. Daniele Paserman, 2006. "Mass migration to Israel and natives' employment transitions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(4), pages 630-652, July.
  7. Friedberg, Rachel M, 2000. "You Can't Take It with You? Immigrant Assimilation and the Portability of Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 221-51, April.
  8. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1996. "Searching for the Effect of Immigration on the Labor Market," NBER Working Papers 5454, National Bureau of Economic Research, Inc.
  9. Adriana D. Kugler & Robert M. Sauer, 2005. "Doctors without Borders? Relicensing Requirements and Negative Selection in the Market for Physicians," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 437-466, July.
  10. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  11. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  12. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-89, October.
  13. William J. Carrington & Pedro Lima, 1996. "The impact of 1970s repatriates from Africa on the Portuguese labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(2), pages 330-347, January.
  14. Cohen-Goldner, Sarit & Eckstein, Zvi, 2002. "Labour Mobility of Immigrants: Training, Experience, Language and Opportunities," CEPR Discussion Papers 3412, C.E.P.R. Discussion Papers.
  15. Joseph Altonji & David Card, 1989. "The Effects of Immigration on the Labor Market Outcome of Less-Skilled Natives," Working Papers 636, Princeton University, Department of Economics, Industrial Relations Section..
  16. Cohen Goldner, Sarit & Eckstein, Zvi, 2004. "Estimating the Return to Training and Occupational Experience: The Case of Female Immigrants," IZA Discussion Papers 1225, Institute for the Study of Labor (IZA).
  17. David Card, 1997. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," NBER Working Papers 5927, National Bureau of Economic Research, Inc.
  18. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  19. Cohen Goldner, Sarit & Paserman, M. Daniele, 2004. "Mass Migration to Israel and Natives' Transitions from Employment," IZA Discussion Papers 1319, Institute for the Study of Labor (IZA).
  20. Robert J. LaLonde & Robert H. Topel, 1989. "Labor Market Adjustments to Increased Immigration," University of Chicago - George G. Stigler Center for Study of Economy and State 55, Chicago - Center for Study of Economy and State.
  21. William J. Carrington & Pedro J. F. De Lima, 1996. "The Impact of 1970s Repatriates from Africa on the Portuguese Labor Market," ILR Review, Cornell University, ILR School, vol. 49(2), pages 330-347, January.
  22. Jennifer Hunt, 1992. "The impact of the 1962 repatriates from Algeria on the French labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(3), pages 556-572, April.
  23. Jennifer Hunt, 1992. "The Impact of the 1962 Repatriates from Algeria on the French Labor Market," ILR Review, Cornell University, ILR School, vol. 45(3), pages 556-572, April.
  24. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
  25. Joseph G. Altonji & David Card, 1989. "The Effects of Immigration on the Labor Market Outcomes of Natives," NBER Working Papers 3123, National Bureau of Economic Research, Inc.
  26. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, October.
  27. Rachel M. Friedberg, 2001. "The Impact Of Mass Migration On The Israeli Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1373-1408, November.
  28. Jörn-Steffen Pischke & Johannes Velling, 1997. "Employment Effects Of Immigration To Germany: An Analysis Based On Local Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 594-604, November.
  29. Christian Dustmann & Francesca Fabbri & Ian Preston, 2005. "The Impact of Immigration on the British Labour Market," Economic Journal, Royal Economic Society, vol. 115(507), pages F324-F341, November.
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