Working Paper: CEPR ID: DP2983
Authors: Zvi Hercowitz; Eran Yashiv
Abstract: This Paper studies the effects of mass immigration from the former USSR to Israel in the 1990s on the employment of the native-born. The exogeneity and the size of this inflow make it a ?natural experiment? of macroeconomic proportions. An open-economy macroeconomic model is used to analyse this experience, focusing on the differential entry of immigrants into the labour and goods markets and the ensuing dynamic implications for labour demand. The reduced form of the model ? consisting of two equations for native employment and the relative price of domestic goods ? is estimated, finding negative effects of immigration on native employment a year after arrival. The delay in the effect is attributed to a positive impact of immigration on the excess demand for goods and, thus, on the demand for labour earlier on.
Keywords: employment; immigration; open economy macroeconomics
JEL Codes: E24; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Immigration inflow (F22) | native employment (J15) |
| Early positive effects of immigration on excess demand for goods (J69) | increased labor demand (J23) |
| increased labor demand (J23) | native employment (J15) |
| Labor supply increases (J20) | native employment (J15) |
| Changes in relative price of domestic goods (F16) | labor demand (J23) |
| Increased immigrant participation in labor market (J68) | relative price of goods (P22) |
| relative price of goods (P22) | native employment (J15) |