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On the Labor Market Effects of Immigration and Trade

  • George J. Borjas
  • Richard B. Freeman
  • Lawrence F. Katz

In the 1980s, the wages and employment rates of less-skilled Americans fell relative to those of more-skilled workers. This paper examines the contribution of the continuing inflow of less-skilled immigrants and the increasing importance of imports in the U.S. economy to these trends. Our empirical evidence indicates that both trade and immigration augmented the nation's supply of less-skilled workers, particularly workers with less than a high school education. By 1988, trade and immigration increased the effective supply of high school dropouts by 28 percent for men and 31 percent for women. We estimate that from thirty to fifty percent of the approximately 10 percentage point decline in the relative weekly wage of high school dropouts between 1980 and 1988 can be attributed to the trade and immigration flows. In addition, our analysis suggests that from 15 to 25 percent of the 11 percentage point rise in the earnings of college graduates relative to high school graduates from 1980 to 1985 can be attributed to the massive increase in the trade deficit over the same period, but that the effects of trade on the college/high school wage differential diminished with improvements in the trade balance during the late 1980s.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3761.

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Date of creation: Jun 1991
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Publication status: published as George J. Borjas and Richard B. Freeman, editors. Immigration and the Work Force: Economic Consequences for the United States and Source Areas. Chicago: The University of Chicago Press, September 1992.
Handle: RePEc:nbr:nberwo:3761
Note: LS
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