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Tradability and the Labor-Market Impact of Immigration: Theory and Evidence from the U.S

Author

Listed:
  • Ariel Burstein
  • Gordon Hanson
  • Lin Tian
  • Jonathan Vogel

Abstract

In this paper, we show that labor-market adjustment to immigration differs across tradable and nontradable occupations. Theoretically, we derive a simple condition under which the arrival of foreign-born labor crowds native-born workers out of (or into) immigrant-intensive jobs, thus lowering (or raising) relative wages in these occupations, and explain why this process differs within tradable versus within nontradable activities. Using data for U.S. commuting zones over the period 1980 to 2012, we find that consistent with our theory a local influx of immigrants crowds out employment of native-born workers in more relative to less immigrant-intensive nontradable jobs, but has no such effect within tradable occupations. Further analysis of occupation labor payments is consistent with adjustment to immigration within tradables occurring more through changes in output (versus changes in prices) when compared to adjustment within nontradables, thus confirming our model’s theoretical mechanism. Our empirical results are robust to alternative specifications, including using industry rather than occupation variation. We then build on these insights to construct a quantitative framework to evaluate the consequences of counterfactual changes in U.S. immigration.

Suggested Citation

  • Ariel Burstein & Gordon Hanson & Lin Tian & Jonathan Vogel, 2017. "Tradability and the Labor-Market Impact of Immigration: Theory and Evidence from the U.S," NBER Working Papers 23330, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23330
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    References listed on IDEAS

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    1. Lorenzo CALIENDO & Maximiliano DVORKIN & Fernando PARRO, 2016. "Trade and Labor Market Dynamics," Discussion papers 16050, Research Institute of Economy, Trade and Industry (RIETI).
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    Cited by:

    1. Lorenzo Caliendo & Luca David Opromolla & Fernando Parro & Alessandro Sforza, 2017. "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement," CEP Discussion Papers dp1494, Centre for Economic Performance, LSE.
    2. repec:bin:bpeajo:v:48:y:2017:i:2017-01:p:83-168 is not listed on IDEAS

    More about this item

    JEL classification:

    • F0 - International Economics - - General
    • J0 - Labor and Demographic Economics - - General

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