Real wages are typically calculated using a common price index that
represents average prices nationwide. However, immigrants tend to
settle in relatively expensive urban locations; deflating their nominal
wages with a nationwide index understates the prices they face and overstates
their real wages. I examine the implications of this price and settlement variation
for the measurement of immigrant-native wage inequality and cohort assimilation.
Accounting for the spatial variation in prices, the U.S. immigrantnative
wage gap is much larger in real terms than in nominal terms. Relative
wage improvements are slower in real terms over 1980-1990. Over 1990-2000
the pattern reverses; relative wage improvements are faster in real terms for
each cohort. The rate of assimilation is slightly slower over 1980-2000. I consider
a simple spatial equilibrium framework to interpret immigrants’ location
decisions. The model allows for spatial differences in productivity and quality
of life, which implicitly influence workers’ location choice. Calibration of the
model suggests productivity differences are more important determinants of
the relative concentration of immigrants.