Given the interest and policy relevance (as well as Miles Kimball’s immigration tweet day), I thought I’d write a post on the theory and empirics of the effects of immigration in the labor market.
A simple starting point for thinking about the labor market effects of immigration begins with the supply and demand for labor.
Supply:
An increase in the number of immigrants increases aggregate labor supply. You can see this in the chart as a rightward shift in labor supply (from S to S’) since the number of people who are willing to work for a given wage increases for all wages. Based partially on this simple framework, some believe that immigration decreases wages. Prominent economists in the immigration literature such as George Borjas espouse this “labor demand is downward sloping” view of immigration and argue that increased immigration adds to the supply of workers and depresses the…
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