The Impact of Immigration on Wages, Internal Migration and Welfare

From Suphanit Piyapromdee:

Over the past few decades, the number of immigrants entering the U.S. has increased substantially. The local impacts of immigration may differ from national impacts since some cities attract more immigrants. Even within a city, workers may be affected differently depending on the substitutability of their labor with that of the new arrivals as well as their abilities to move. This paper studies the impact of immigration on wages, internal migration and welfare. I develop and estimate an equilibrium model where labor differs by skill level, gender, experience and nativity. Workers are also heterogeneous in city preferences and place attachments. Cities vary in productivity levels, housing prices and local amenities. The results indicate that a 30 percent increase in the stock of immigrants has a small impact on the wages and welfare of natives. If workers are constrained to remain in their original locations, the initial wage impacts on previous immigrants are negative and much more severe in the popular destina- tions for new immigrants. When workers migrate in response to the immigration, the negative wage and welfare impacts in most locations are diffused. However, the negative impacts on the wages of low skill workers in some locations intensify. This is because low skill workers have stronger attachments to places, and hence are less mobile relative to high skill workers. The extent to which the migration responses reduce the adverse wage impacts depends on a city’s labor composition. The model is also used to assess changes in the skill mix of immigrants and a location-specific immigration policy.


About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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