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Remittances and the Wage Impact of Immigration

This paper examines how the outflow of remittances affects the wages of native workers. The model shows that the wage impact of immigration depends on the competing effects of an increase in labor market competition and an increase in the consumer base. Immigrant remittances provide a unique way of isolating this latter effect since they reduce the consumer base but not the workforce. The predictions of the model are tested using an unusually rich German data set that has detailed information on remittances and wages. As expected, the results indicate that a one percent increase in remittances depress the wages of native workers by 0.06%. Furthermore, remittances predominantly affect workers in non-traded industries that are more reliant on domestic consumption.

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Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2011-13.

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Length: 51 pages
Date of creation: Nov 2011
Date of revision: Apr 2014
Handle: RePEc:wil:wileco:2011-13
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