Working Paper: NBER ID: w19932
Authors: Andri Chassamboulli; Giovanni Peri
Abstract: A controversial issue in the US is how to reduce the number of illegal immigrants and what effect this would have on the US economy. To answer this question we set up a two-country model with search in labor markets and featuring legal and illegal immigrants among the low skilled. We calibrate it to the US and Mexican economies during the period 2000-2010. As immigrants, especially illegal ones, have a worse outside option than natives their wages are lower. Hence their presence reduces the labor cost of employers who, as a consequence, create more jobs per unemployed when there are more immigrants. Because of such effect our model shows that increasing deportation rates and tightening border control weakens the low-skilled labor markets, increasing unemployment of native low skilled. Legalization, instead decreases the unemployment rate of low-skilled natives and it increases income per native.
Keywords: illegal immigration; labor market; policy effects
JEL Codes: E24; J15; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increasing deportation rates (K37) | increase in unemployment for native low-skilled workers (F66) |
| tightening border control (F55) | increase in unemployment for native low-skilled workers (F66) |
| presence of illegal immigrants (K37) | lower wages for firms (J31) |
| lower wages for firms (J31) | more job openings for natives (J68) |
| legalization of illegal immigrants (K37) | increase in job creation (J23) |
| increase in job creation (J23) | decrease in unemployment for native low-skilled workers (F66) |