Working Paper: NBER ID: w17461
Authors: George J. Borjas; Jeffrey Grogger; Gordon H. Hanson
Abstract: The wage impact of immigration depends crucially on the elasticity of substitution between similarly skilled immigrants and natives and the elasticity of substitution between high school dropouts and graduates. This paper revisits the estimation of these elasticities. The U.S. data indicate that equally skilled immigrants and natives are perfect substitutes. The value of the second elasticity depends on how one controls for changes in demand that have differentially affected high school dropouts and graduates. The groups are imperfect substitutes under standard trend assumptions, but even slight deviations from these assumptions can lead to an outright rejection of the CES framework.
Keywords: Immigration; Labor Market; Elasticity of Substitution
JEL Codes: J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| equally skilled immigrants (J61) | natives (J15) |
| high school dropouts (I21) | high school graduates (I23) |
| demand changes (O00) | elasticity of substitution between high school dropouts and high school graduates (J24) |
| standard assumptions (C20) | elasticity of substitution between high school dropouts and high school graduates (J24) |
| deviations from standard assumptions (C20) | variations in estimated elasticities (C51) |