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Rethinking the Effects of Immigration on Wages

  • Gianmarco I.P. Ottaviano
  • Giovanni Peri

This paper asks the following question: what was the effect of surging immigration on average and individual wages of U.S.-born workers during the period 1990-2004? We emphasize the need for a general equilibrium approach to analyze this problem. The impact of immigrants on wages of U.S.-born workers can be evaluated only by accounting carefully for labor market and capital market interactions in production. Using such a general equilibrium approach we estimate that immigrants are imperfect substitutes for U.S.- born workers within the same education-experience-gender group (because they choose different occupations and have different skills). Moreover, accounting for a reasonable speed of adjustment of physical capital we show that most of the wage effects of immigration accrue to native workers within a decade. These two facts imply a positive and significant effect of the 1990-2004 immigration on the average wage of U.S.-born workers overall, both in the short run and in the long run. This positive effect results from averaging a positive effect on wages of U.S.-born workers with at least a high school degree and a small negative effect on wages of U.S.-born workers with no high school degree.

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File URL: http://www.nber.org/papers/w12497.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12497.

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Date of creation: Aug 2006
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Publication status: published as Ottaviano, Gianmarco and Giovanni Peri. “Rethinking the Effects of Immigration on Wages: New Data and Analysis from 1990- 2004” IPC IN FOCUS, the American Immigration Law Foundation's Immigration Policy Center 5, 8 (October 2006).
Handle: RePEc:nbr:nberwo:12497
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  13. Antonio Ciccone & Giovanni Peri, 2004. "Long-run substitutability between more and less educated workers: Evidence from U.S. States 1950-1990," Economics Working Papers 764, Department of Economics and Business, Universitat Pompeu Fabra.
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  17. David Card, 1990. "The impact of the Mariel boatlift on the Miami labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
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  24. Gianmarco I.P. Ottaviano & Giovanni Peri, 2004. "The Economic Value of Cultural Diversity: Evidence from US Cities," CESifo Working Paper Series 1117, CESifo Group Munich.
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  29. Ethan Lewis, 2005. "Immigration, skill mix, and the choice of technique," Working Papers 05-8, Federal Reserve Bank of Philadelphia.
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