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Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession

  • Brian C. Cadena
  • Brian K. Kovak

This paper demonstrates that low-skilled Mexican-born immigrants' location choices in the U.S. respond strongly to changes in local labor demand, and that this geographic elasticity helps equalize spatial differences in labor market outcomes for low-skilled native workers, who are much less responsive. We leverage the wage rigidity that occurred during Great Recession to identify the severity of local downturns, and our results confirm the standard finding that high-skilled populations are quite geographically responsive to employment opportunities while low-skilled populations are much less so. However, low-skilled immigrants, primarily those from Mexico, respond even more strongly than high-skilled native-born workers. These results are robust to a wide variety of controls, a pre-recession falsification test, and two instrumental variables strategies. A novel empirical test reveals that natives living in cities with a substantial Mexican-born population are insulated from the effects of local labor demand shocks compared to those in cities with few Mexicans. The reallocation of the Mexican-born workforce among these cities reduced the incidence of local demand shocks on low-skilled natives' employment outcomes by more than 40 percent.

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File URL: http://www.nber.org/papers/w19272.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19272.

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Date of creation: Aug 2013
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Handle: RePEc:nbr:nberwo:19272
Note: ITI LS
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  1. Konstantinos Tatsiramos, 2009. "Geographic labour mobility and unemployment insurance in Europe," Journal of Population Economics, Springer, vol. 22(2), pages 267-283, April.
  2. Rothstein, Jesse, 2012. "The Labor Market Four Years Into the Crisis: Assessing Structural Explanations," Institute for Research on Labor and Employment, Working Paper Series qt2x576316, Institute of Industrial Relations, UC Berkeley.
  3. repec:oup:qjecon:v:129:y:2013:i:1:p:1-59 is not listed on IDEAS
  4. Kerwin Kofi Charles & Erik Hurst & Matthew J. Notowidigdo, 2013. "Manufacturing Decline, Housing Booms, and Non-Employment," NBER Working Papers 18949, National Bureau of Economic Research, Inc.
  5. David Card, 1996. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Working Papers 747, Princeton University, Department of Economics, Industrial Relations Section..
  6. Petri Böckerman & Mika Haapanen, 2013. "The effect of polytechnic reform on migration," Journal of Population Economics, Springer, vol. 26(2), pages 593-617, April.
  7. David Mare & Melanie Morten & Steven Stillman, 2007. "Settlement patterns and the geographic mobility of recent migrants to New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(2), pages 163-195.
  8. Gordon H. Hanson & Antonio Spilimbergo, 1996. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," Research Department Publications 4036, Inter-American Development Bank, Research Department.
  9. Pia M. Orrenius & Madeline Zavodny, 2010. "Mexican Immigrant Employment Outcomes over the Business Cycle," American Economic Review, American Economic Association, vol. 100(2), pages 316-20, May.
  10. Brian C. Cadena, 2013. "Native Competition and Low-Skilled Immigrant Inflows," Journal of Human Resources, University of Wisconsin Press, vol. 48(4), pages 910-944.
  11. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-91, October.
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