Working Paper: CEPR ID: DP13670
Authors: Karen Helene Ulltveit Moe; Andreas Moxnes; Bernt Bratsberg; Oddbjorn Raaum
Abstract: This paper investigates the impact of a large shock to labor supply from immigration on occupational wages, labor costs and industry growth. We develop a simple factor-proportions theory where individuals sort into occupations, and industries use occupations with different factor intensities. The model delivers an empirical framework and testable hypotheses that we confront with a rich data set on industry performance, occupational characteristics and immigration. We apply the methodology to one of the largest labor immigration shocks of the 21th century: The immigration wave to Norway after the Eastern enlargement of the European Union. We introduce a novel instrument that exploits the fact that the language requirements are significant barriers for foreign workers and these requirements vary across occupations. The results point to labor migration leading to large adjustments in relative industry employment, labor costs and wages, and these effects are particularly strong in industries that are initially intensive in the use of immigrant occupations. Finally, a quantification of the general equilibrium of our model shows that the welfare effect of immigration was close to zero for natives, but negative for the existing population of immigrants.
Keywords: immigration; eastern enlargement; industry adjustments
JEL Codes: F22; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large immigration shock (F22) | significant adjustments in relative industry employment (L16) |
| large immigration shock (F22) | significant adjustments in labor costs (J39) |
| large immigration shock (F22) | significant adjustments in wages (J31) |
| increase in immigration supply (J69) | lowers relative wages in occupations predominantly filled by immigrants (J69) |
| initial immigrant share in an occupation (J69) | decline in wages in immigrant-intensive industries (J69) |
| initial immigrant share in an occupation (J69) | increase in employment in immigrant-intensive industries (J68) |
| language intensity (J80) | differential sorting of immigrants into occupations (J69) |
| immigration (F22) | welfare effect for natives (D69) |
| immigration (F22) | welfare effect for existing immigrant populations (J68) |