Working Paper: NBER ID: w23330
Authors: Ariel Burstein; Gordon Hanson; Lin Tian; Jonathan Vogel
Abstract: In this paper, we show that labor-market adjustment to immigration differs across tradable and nontradable occupations. Theoretically, we derive a simple condition under which the arrival of foreign-born labor crowds native-born workers out of (or into) immigrant-intensive jobs, thus lowering (or raising) relative wages in these occupations, and explain why this process differs within tradable versus within nontradable activities. Using data for U.S. commuting zones over the period 1980 to 2012, we find that consistent with our theory a local influx of immigrants crowds out employment of native-born workers in more relative to less immigrant-intensive nontradable jobs, but has no such effect within tradable occupations. Further analysis of occupation labor payments is consistent with adjustment to immigration within tradables occurring more through changes in output (versus changes in prices) when compared to adjustment within nontradables, thus confirming our model’s theoretical mechanism. Our empirical results are robust to alternative specifications, including using industry rather than occupation variation. We then build on these insights to construct a quantitative framework to evaluate the consequences of counterfactual changes in U.S. immigration.
Keywords: Immigration; Labor Market; Tradability
JEL Codes: F0; J0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| arrival of foreign-born labor (J69) | crowding out of native-born workers in nontradable jobs (J69) |
| local influx of immigrants (J61) | reduction in native employment in nontradables (J68) |
| local influx of immigrants (J61) | negligible impact on native employment in tradable occupations (F66) |
| adjustment within tradables (F16) | changes in output (E23) |