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Citation Information

Type Working Paper ff8
Title Rethinking the Gains from Immigration: Theory and Evidence from the US
Publication (Day/Month/Year) 2005
URL https://www.econstor.eu/bitstream/10419/73993/1/NDL2006-052.pdf
The standard empirical analysis of immigration, based on a simple labor demand and
labor supply framework, has emphasized the negative impact of foreign born workers
on the average wage of U.S.-born workers (particularly of those without a high school
degree). A precise assessment of the average and relative effects of immigrants on U.S.
wages, however, needs to consider labor as a differentiated input in production.
Workers of different educational and experience levels are employed in different
occupations and are therefore imperfectly substitutable. When taking this approach, one
realizes that foreign-born workers are “complements” of U.S.-born workers in two
ways. First, foreign-born residents are relatively abundant in the educational groups in
which natives are scarce. Second, their choice of occupations for given education and
experience attainments is quite different from that of natives. This implies that U.S.- and
foreign-born workers with similar education and experience levels are imperfectly
substitutable. Accounting carefully for these complementarities and for the adjustment
of physical capital induced by immigration, the conventional finding of immigration’s
impact on native wages is turned on its head: overall immigration over the 1980- 2000
period significantly increased the average wages of U.S.-born workers (by around 2%).
Considering its distribution across workers, such an effect was positive for the wage of
all native workers with at least a high school degree (88% of the labor force in year
2000), while it was null to moderately negative for the wages of natives without a high
school degree.

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