Working Paper: NBER ID: w19272
Authors: Brian C. Cadena; Brian K. Kovak
Abstract: This paper demonstrates that low-skilled Mexican-born immigrants' location choices in the U.S. respond strongly to changes in local labor demand, and that this geographic elasticity helps equalize spatial differences in labor market outcomes for low-skilled native workers, who are much less responsive. We leverage the substantial geographic variation in employment losses that occurred during Great Recession, and our results confirm the standard finding that high-skilled populations are quite geographically responsive to employment opportunities while low-skilled populations are much less so. However, low-skilled immigrants, especially those from Mexico, respond even more strongly than high-skilled native-born workers. These results are robust to a wide variety of controls, a pre-recession falsification test, and two instrumental variables strategies. Moreover, we show that natives living in metro areas with a substantial Mexican-born population are insulated from the effects of local labor demand shocks compared to those in places with few Mexicans. The reallocation of the Mexican-born workforce reduced the incidence of local demand shocks on low-skilled natives' employment outcomes by roughly 40 percent.
Keywords: Immigration; Labor Markets; Great Recession; Geographic Mobility
JEL Codes: F22; J21; J61; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Low-skilled Mexican-born immigrants' geographic responsiveness to local labor demand changes (J69) | Labor market outcomes for low-skilled native workers (F66) |
| 10 percentage point decline in local employment (F66) | 57 percentage point larger decline in the population of low-skilled Mexican-born workers (J69) |
| Reallocation of the Mexican-born workforce (J69) | 40% reduction in the incidence of local demand shocks on low-skilled native employment outcomes (J68) |
| Mexican mobility (J62) | Labor market insurance for low-skilled natives (J68) |
| Low-skilled Mexican-born immigrants' responsiveness to local labor demand changes (J69) | Insulation of natives from local labor demand shocks (J69) |