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Measuring Immigration's Effects on Labor Demand: A Reexamination of the Mariel Boatlift

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  • Bodvarsson, Örn B.

    (Westminster College, Salt Lake City)

  • Lewer, Joshua J.

    (Bradley University)

  • Van den Berg, Hendrik

    (University of Nebraska-Lincoln)

Abstract

It is now well known that exogenous immigration shocks tend to have benign effects on native employment outcomes, thanks to various secondary adjustment processes made possible by flexible markets. One adjustment process that has received scant attention is that immigrants, as consumers of the goods they help produce, contribute to their own demand. We examine the effects of an immigration shock on labor demand by testing a general equilibrium model in which imperfectly substitutable native and immigrant workers spend their wages on a locally produced good. The shock induces three responses: (i) a substitution of immigrants for natives; (ii) out-migration; and (iii) stimulation of labor demand. According to (iii), native wages can fall, stay the same or rise, depending upon the strength of the shock and various product and factor market elasticities. As our test case, we reexamine the 1980 “Mariel Boatlift,” using Wacziarg’s “Channel Transmission” methodology. Our data set includes approximately 6,600 observations for 1979-85 from the Current Population Survey on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities. Our results provide a more complete explanation for why the Boatlift’s overall effects on native wages in Miami were benign: Lower wages due to greater labor supply were offset by higher wages due to greater labor demand. We conclude that the demand-augmenting effect of an immigration shock is a significant secondary adjustment process that must be considered when assessing the distributional effects of immigration.

Suggested Citation

  • Bodvarsson, Örn B. & Lewer, Joshua J. & Van den Berg, Hendrik, 2007. "Measuring Immigration's Effects on Labor Demand: A Reexamination of the Mariel Boatlift," IZA Discussion Papers 2919, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2919
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    Cited by:

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    2. Michael Gerfin & Boris Kaiser, 2010. "The Effects of Immigration on Wages: An Application of the Structural Skill-Cell Approach," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(IV), pages 709-739, December.
    3. Henri L.F. de Groot & Jacques Poot & Martijn J. Smit, 2007. "Agglomeration, Innovation and Regional Development: Theoretical Perspectives and Meta-Analysis," Tinbergen Institute Discussion Papers 07-079/3, Tinbergen Institute.
    4. Susanne Prantl & Alexandra Spitz-Oener, 2013. "Interacting Product and Labor Market Regulation and the Impact of Immigration on Native Wages," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_22, Max Planck Institute for Research on Collective Goods.
    5. Gray, Rowena & Montresor, Giulia & Wright, Greg C., 2020. "Processing immigration shocks: Firm responses on the innovation margin," Journal of International Economics, Elsevier, vol. 126(C).
    6. Hausmann, Ricardo & Nedelkoska, Ljubica, 2018. "Welcome home in a crisis: Effects of return migration on the non-migrants' wages and employment," European Economic Review, Elsevier, vol. 101(C), pages 101-132.
    7. Aydemir, Abdurrahman B. & Kırdar, Murat G., 2017. "Quasi-experimental impact estimates of immigrant labor supply shocks: The role of treatment and comparison group matching and relative skill composition," European Economic Review, Elsevier, vol. 98(C), pages 282-315.
    8. Tito Boeri & Marta De Philippis & Eleonora Patacchini & Michele Pellizzari, 2015. "Immigration, Housing Discrimination and Employment," Economic Journal, Royal Economic Society, vol. 125(586), pages 82-114, August.
    9. Mazzolari, Francesca & Numark, David, 2009. "The Effects of Immigration on the Scale and Composition of Demand: A study of California establishments," MPRA Paper 19217, University Library of Munich, Germany.
    10. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    11. Francesca Mazzolari & David Neumark, 2012. "Immigration and product diversity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 1107-1137, July.
    12. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    13. Kugler, Adriana & Yuksel, Mutlu, 2008. "Effects of Low-Skilled Immigration on U.S. Natives: Evidence from Hurricane Mitch," IZA Discussion Papers 3670, Institute of Labor Economics (IZA).
    14. Latif, Ehsan, 2015. "The relationship between immigration and unemployment: Panel data evidence from Canada," Economic Modelling, Elsevier, vol. 50(C), pages 162-167.
    15. Michael Clemens, 2013. "The Effect of Foreign Labor on Native Employment: A Job-Specific Approach and Application to North Carolina Farms- Working Paper 326," Working Papers 326, Center for Global Development.
    16. Peri, Giovanni & Rury, Derek & Wiltshire, Justin C., 2020. "The Economic Impact of Migrants from Hurricane Maria," IZA Discussion Papers 13049, Institute of Labor Economics (IZA).
    17. Seung-hun Chung & Mark D. Partridge, 2019. "Are shocks to human capital composition permanent? Evidence from the Mariel boatlift," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 461-515, December.
    18. Murat Genc & Selim Cagatay & Onur A. Koska & Perihan O. Saygin, 2013. "Immigration, Enterprises, and Employment in the European Union," EcoMod2013 5694, EcoMod.
    19. König, Jan & Skupnik, Christoph, 2012. "Labor market integration of migrants: Hidden costs and benefits in two-tier welfare states," Discussion Papers 2012/5, Free University Berlin, School of Business & Economics.
    20. Chletsos, Michael & Roupakias, Stelios, 2012. "Immigration, Unemployment and Growth: Empirical Evidence from Greece," MPRA Paper 39861, University Library of Munich, Germany.
    21. Chletsos, Michael & Roupakias, Stelios, 2012. "The impact of immigration on the greek labor market," MPRA Paper 39872, University Library of Munich, Germany.
    22. Giovanni Peri & Vasil Yasenov, 2015. "The Labor Market Effects of a Refugee Wave: Applying the Synthetic Control Method to the Mariel Boatlift," NBER Working Papers 21801, National Bureau of Economic Research, Inc.
    23. Tito Boeri & Marta De Philippis & Eleonora Patacchini & Michele Pelizzari, 2010. "Moving to Segregation: Evidence from 8 Italian cities," EIEF Working Papers Series 1109, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2011.
    24. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142, April.

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    More about this item

    Keywords

    immigration; demand; transmission channels; wages;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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