Working Paper: NBER ID: w12497
Authors: Gianmarco I.P. Ottaviano; Giovanni Peri
Abstract: This paper asks the following question: what was the effect of surging immigration on average and individual wages of U.S.-born workers during the period 1990-2004? We emphasize the need for a general equilibrium approach to analyze this problem. The impact of immigrants on wages of U.S.-born workers can be evaluated only by accounting carefully for labor market and capital market interactions in production. Using such a general equilibrium approach we estimate that immigrants are imperfect substitutes for U.S.- born workers within the same education-experience-gender group (because they choose different occupations and have different skills). Moreover, accounting for a reasonable speed of adjustment of physical capital we show that most of the wage effects of immigration accrue to native workers within a decade. These two facts imply a positive and significant effect of the 1990-2004 immigration on the average wage of U.S.-born workers overall, both in the short run and in the long run. This positive effect results from averaging a positive effect on wages of U.S.-born workers with at least a high school degree and a small negative effect on wages of U.S.-born workers with no high school degree.
Keywords: Immigration; Wages; Labor Market; General Equilibrium
JEL Codes: F22; J31; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Immigration during the period 1990-2004 (K37) | Average wage of US-born workers (J39) |
| Immigration increases labor supply (J69) | Average wage of US-born workers (J39) |
| Immigration (F22) | Wage gains for native workers with at least a high school degree (J39) |
| Immigration (F22) | Negative wage effect for native workers without a high school diploma (J79) |
| Immigrant labor affects productivity and wages of native workers (F66) | Average wage of US-born workers (J39) |