IDEAS home Printed from https://ideas.repec.org/p/crm/wpaper/2118.html
   My bibliography  Save this paper

Occupational Barriers and the Productivity Penalty from Lack of Legal Status

Author

Listed:
  • Francesc Ortega

    (Queens College CUNY)

Abstract

Wage gaps between documented (including natives) and undocumented workers reflect employer exploitation, endogenous occupational sorting and productivity losses associated with lack of legal status. Identification of the productivity penalty is crucial to estimate the net economic gains from legalization. Our paper presents a model-based strategy to identify the productivity penalty associated with lack of legal status. In the model, heterogeneous workers choose occupations and undocumented workers are subject to employer discrimination and experience productivity loss in occupations characterized by tasks that require legal status. The theoretical analysis provides guidance on how to identify occupational barriers and on how to compute a lower bound for the undocumented productivity penalty. Applying this strategy to individual-level data that imputes undocumented status, we estimate that the productivity penalty associated with lack of legal status in the United States is at least 5%. This implies that legalization of undocumented workers not only improves their wages, but also increases GDP

Suggested Citation

  • Francesc Ortega, 2021. "Occupational Barriers and the Productivity Penalty from Lack of Legal Status," RF Berlin - CReAM Discussion Paper Series 2118, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
  • Handle: RePEc:crm:wpaper:2118
    as

    Download full text from publisher

    File URL: https://www.cream-migration.org/publ_uploads/CDP_18_21.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Amy Hsin & Francesc Ortega, 2018. "The Effects of Deferred Action for Childhood Arrivals on the Educational Outcomes of Undocumented Students," Demography, Springer;Population Association of America (PAA), vol. 55(4), pages 1487-1506, August.
    2. Morris M. Kleiner & Alan B. Krueger, 2013. "Analyzing the Extent and Influence of Occupational Licensing on the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 173-202.
    3. Elira Kuka & Na'ama Shenhav & Kevin Shih, 2020. "Do Human Capital Decisions Respond to the Returns to Education? Evidence from DACA," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 293-324, February.
    4. Ying Pan, 2012. "The Impact of Legal Status on Immigrants’ Earnings and Human Capital: Evidence from the IRCA 1986," Journal of Labor Research, Springer, vol. 33(2), pages 119-142, June.
    5. Catalina Amuedo-Dorantes & Cynthia Bansak & Steven Raphael, 2007. "Gender Differences in the Labor Market: Impact of IRCA," American Economic Review, American Economic Association, vol. 97(2), pages 412-416, May.
    6. Hoyt Bleakley & Aimee Chin, 2010. "Age at Arrival, English Proficiency, and Social Assimilation among US Immigrants," American Economic Journal: Applied Economics, American Economic Association, vol. 2(1), pages 165-192, January.
    7. Patricia Cortes & Jessica Pan, 2014. "Foreign nurse importation to the United States and the supply of native registered nurses," Working Papers 14-7, Federal Reserve Bank of Boston.
    8. Christoph Albert, 2021. "The Labor Market Impact of Immigration: Job Creation versus Job Competition," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 35-78, January.
    9. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    10. Sherrie A. Kossoudji & Deborah A. Cobb-Clark, 2002. "Coming out of the Shadows: Learning about Legal Status and Wages from the Legalized Population," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 598-628, July.
    11. Joan Monras & Javier Vázquez-Grenno & Ferran Elias, 2017. "Understanding the Effects of Legalizing Undocumented Immigrants," RF Berlin - CReAM Discussion Paper Series 1708, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    12. Joël MACHADO, 2017. "Dealing with Undocumented Immigrants: The Welfare Effects of Amnesties and Deportations," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 83(4), pages 445-492, December.
    13. Zachary Liscow & William Gui Woolston, 2018. "Does Legal Status Matter for Educational Choices? Evidence from Immigrant Teenagers," American Law and Economics Review, American Law and Economics Association, vol. 20(2), pages 318-381.
    14. Borjas, George J. & Cassidy, Hugh, 2019. "The wage penalty to undocumented immigration," Labour Economics, Elsevier, vol. 61(C).
    15. Francisco L. Rivera-Batiz, 1999. "Undocumented workers in the labor market: An analysis of the earnings of legal and illegal Mexican immigrants in the United States," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(1), pages 91-116.
    16. Edwards, Ryan & Ortega, Francesc, 2017. "The economic contribution of unauthorized workers: An industry analysis," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 119-134.
    17. J. David Brown & Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2013. "Does Employing Undocumented Workers Give Firms A Competitive Advantage?," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 158-170, February.
    18. Herbert Brücker & Albrecht Glitz & Adrian Lerche & Agnese Romiti, 2021. "Occupational Recognition and Immigrant Labor Market Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 497-525.
    19. Cortés, Patricia & Pan, Jessica, 2014. "Foreign nurse importation and the supply of native nurses," Journal of Health Economics, Elsevier, vol. 37(C), pages 164-180.
    20. Lozano, Fernando A. & Sorensen, Todd A., 2011. "The Labor Market Value to Legal Status," IZA Discussion Papers 5492, Institute of Labor Economics (IZA).
    21. Pia M. Orrenius & Madeline Zavodny, 2015. "The impact of E‐Verify mandates on labor market outcomes," Southern Economic Journal, John Wiley & Sons, vol. 81(4), pages 947-959, April.
    22. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-1149, September.
    23. Pope, Nolan G., 2016. "The Effects of DACAmentation: The Impact of Deferred Action for Childhood Arrivals on Unauthorized Immigrants," Journal of Public Economics, Elsevier, vol. 143(C), pages 98-114.
    24. Carlo Devillanova & Francesco Fasani & Tommaso Frattini, 2018. "Employment of Undocumented Immigrants and the Prospect of Legal Status: Evidence from an Amnesty Program ," ILR Review, Cornell University, ILR School, vol. 71(4), pages 853-881, August.
    25. Robert Warren & John Robert Warren, 2013. "Unauthorized Immigration to the United States: Annual Estimates and Components of Change, by State, 1990 to 2010," International Migration Review, Wiley Blackwell, vol. 47(2), pages 296-329, June.
    26. Patler, Caitlin & Laster Pirtle, Whitney, 2018. "From undocumented to lawfully present: Do changes to legal status impact psychological wellbeing among latino immigrant young adults?," Social Science & Medicine, Elsevier, vol. 199(C), pages 39-48.
    27. Chang‐Tai Hsieh & Erik Hurst & Charles I. Jones & Peter J. Klenow, 2019. "The Allocation of Talent and U.S. Economic Growth," Econometrica, Econometric Society, vol. 87(5), pages 1439-1474, September.
    28. Cristian Bartolucci, 2014. "Understanding the Native–Immigrant Wage Gap Using Matched Employer-Employee Data," ILR Review, Cornell University, ILR School, vol. 67(4), pages 1166-1202, October.
    29. Matthew Hall & Emily Greenman, 2015. "The Occupational Cost of Being Illegal in the United States: Legal Status, Job Hazards, and Compensating Differentials," International Migration Review, Wiley Blackwell, vol. 49(2), pages 406-442, June.
    30. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    31. Furtado, Delia & Ortega, Francesc, 2020. "Does Immigration Improve Quality of Care in Nursing Homes?," IZA Discussion Papers 13552, Institute of Labor Economics (IZA).
    32. Barry Chiswick & Yew Lee & Paul Miller, 2005. "Family matters: the role of the family in immigrants' destination language acquisition," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(4), pages 631-647, November.
    33. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    34. Catalina Amuedo-Dorantes & Francisca Antman, 2017. "Schooling and labor market effects of temporary authorization: evidence from DACA," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(1), pages 339-373, January.
    35. Chiswick, Barry R, 1991. "Speaking, Reading, and Earnings among Low-Skilled Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 149-170, April.
    36. George J. Borjas, 2021. "Self-Selection and the Earnings of Immigrants," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 4, pages 69-91, World Scientific Publishing Co. Pte. Ltd..
    37. Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    38. Pia M. Orrenius & Madeline Zavodny, 2016. "Irregular immigration in the European Union," Working Papers 1603, Federal Reserve Bank of Dallas.
    39. González, Libertad & Ortega, Francesc, 2011. "How do very open economies adjust to large immigration flows? Evidence from Spanish regions," Labour Economics, Elsevier, vol. 18(1), pages 57-70, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olivieri, Sergio & Ortega, Francesc & Rivadeneira, Ana, 2023. "Back to Work: The Unequal Effects of the COVID-19 Pandemic on Ecuador's Labor Market," IZA Discussion Papers 16325, Institute of Labor Economics (IZA).
    2. Claudio Deiana & Ludovica Giua & Roberto Nisticò, "undated". "Legalization and Long-Term Outcomes of Immigrant Workers," Development Working Papers 480, Centro Studi Luca d'Agliano, University of Milano.
    3. George J. Borjas & Anthony Edo, 2023. "Monopsony, Efficiency, and the Regularization of Undocumented Immigrants," Working Papers 2023-18, CEPII research center.
    4. Borjas, George J. & Edo, Anthony, 2023. "Monopsony, Efficiency, and the Regularization of Undocumented Immigrants," IZA Discussion Papers 16297, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ortega, Francesc & Hsin, Amy, 2018. "Occupational Barriers and the Labor Market Penalty from Lack of Legal Status," IZA Discussion Papers 11680, Institute of Labor Economics (IZA).
    2. Cascio, Elizabeth U. & Lewis, Ethan G., 2019. "Distributing the Green (Cards): Permanent residency and personal income taxes after the Immigration Reform and Control Act of 1986," Journal of Public Economics, Elsevier, vol. 172(C), pages 135-150.
    3. Claudio Deiana & Ludovica Giua & Roberto Nisticò, "undated". "Legalization and Long-Term Outcomes of Immigrant Workers," Development Working Papers 480, Centro Studi Luca d'Agliano, University of Milano.
    4. Battaglia, Emily, 2023. "Did DACA Harm US-Born Workers? Temporary Work Visas and Labor Market Competition," Journal of Urban Economics, Elsevier, vol. 134(C).
    5. Ortega Francesc & Edwards Ryan & Hsin Amy, 2018. "The Economic Effects of Providing Legal Status to DREAMers," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-18, June.
    6. Eric Schuss, 2020. "Substantial Labor Market Effects of the Residency Status," Journal of International Migration and Integration, Springer, vol. 21(4), pages 993-1026, December.
    7. Giuntella, Osea & Lonsky, Jakub & Mazzonna, Fabrizio & Stella, Luca, 2021. "Immigration policy and immigrants’ sleep. Evidence from DACA," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 1-12.
    8. George J. Borjas & Anthony Edo, 2023. "Monopsony, Efficiency, and the Regularization of Undocumented Immigrants," NBER Working Papers 31457, National Bureau of Economic Research, Inc.
    9. Claudio Deiana & Ludovica Giua & Roberto Nisticò, 2021. "Getting Off on the Wrong Foot: The Long-Term Effects of Missing a Large-Scale Amnesty for Immigrant Workers," CSEF Working Papers 625, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    10. Giuntella, Osea & Lonsky, Jakub, 2020. "The effects of DACA on health insurance, access to care, and health outcomes," Journal of Health Economics, Elsevier, vol. 72(C).
    11. Eric Schuss, 2017. "Substantial Labor Market Effects of the Residency Status: How Important Are Initial Conditions at Arrival for Immigrants?," SOEPpapers on Multidisciplinary Panel Data Research 952, DIW Berlin, The German Socio-Economic Panel (SOEP).
    12. Kiser, Jimena Villanueva & Wilson, Riley, 2024. "DACA, Mobility Investments, and Economic Outcomes of Immigrants and Natives," IZA Discussion Papers 16968, Institute of Labor Economics (IZA).
    13. Borjas, George J. & Edo, Anthony, 2023. "Monopsony, Efficiency, and the Regularization of Undocumented Immigrants," IZA Discussion Papers 16297, Institute of Labor Economics (IZA).
    14. Altangerel, Khulan, 2019. "Essays on immigration policy," Other publications TiSEM 954c6300-249e-496c-8cef-0, Tilburg University, School of Economics and Management.
    15. Borjas, George J. & Cassidy, Hugh, 2019. "The wage penalty to undocumented immigration," Labour Economics, Elsevier, vol. 61(C).
    16. Chassamboulli, Andri & Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro, 2024. "Immigration and labour market flows," Labour Economics, Elsevier, vol. 86(C).
    17. Edwards, Ryan & Ortega, Francesc, 2017. "The economic contribution of unauthorized workers: An industry analysis," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 119-134.
    18. Carlo Devillanova & Francesco Fasani & Tommaso Frattini, 2014. "Employment of Undocumented Immigrants and the Prospect of Legal Status: Evidence from an Amnesty Program," RF Berlin - CReAM Discussion Paper Series 1415, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    19. Wang, Jia & Winters, John V. & Yuan, Weici, 2022. "Can legal status help unauthorized immigrants achieve the American dream? Evidence from the Deferred Action for Childhood Arrivals program," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    20. Andri Chassamboulli & Xiangbo Liu, 2024. "Immigration, Legal Status and Fiscal Impact," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 54, October.

    More about this item

    Keywords

    Immigration; Undocumented; Legalization; Discrimination;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J7 - Labor and Demographic Economics - - Labor Discrimination

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:crm:wpaper:2118. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CReAM Administrator or Matthew Nibloe (email available below). General contact details of provider: https://edirc.repec.org/data/cmucluk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.