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Immigration, Endogenous Technology Adoption and Wages

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  • Manish Pandey
  • Amrita Ray Chaudhuri

Abstract

We document that immigration to U.S. states has increased the mass of workers at the lower range of the skill distribution. We use this change in skill distribution of workers to analyze the effect of immigration on wages. Our model allows firms to endogenously respond to the immigration-induced changes in skill distribution in terms of their decisions (i) to enter different industries which require the use of different technologies; (ii) to choose across technologies that differ in their skill-intensity; and (iii) to employ workers of different skill levels. Allowing these mechanisms to interact, we find that, in line with much of the related empirical literature, immigration has a small effect on average real wages of low skilled workers for U.S. states. We further show that immigration increases the wage inequality between workers of different skill levels in all states, and that the effect of immigration on wages and wage inequality varies systematically with the volume of immigration across states.

Suggested Citation

  • Manish Pandey & Amrita Ray Chaudhuri, 2015. "Immigration, Endogenous Technology Adoption and Wages," Departmental Working Papers 2015-01, The University of Winnipeg, Department of Economics.
  • Handle: RePEc:win:winwop:2015-01
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    References listed on IDEAS

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    1. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    2. Noel Gaston & Douglas R. Nelson, 2013. "Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 98-139, February.
    3. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
    4. Harry P. Bowen & Jennifer Pedussel Wu, 2011. "Immigrant Specificity and the Relationship between Trade and Immigration: Theory and Evidence," Discussion Paper Series 2011-01, McColl School of Business, Queens University of Charlotte, revised 13 Jul 2012.
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    More about this item

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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