The Effects of Immigration on the Labor Market Outcomes of Natives
Joseph G. Altonji
This paper examines the effects of immigration on the labor market
outcomes of less-skilled natives. Working from a simple model of a local labor
market, we show that the effects of immigration can be estimated from the
correlations between the fraction of immigrants in a city and the employment
and wage outcomes of natives. The size of the effects depend on the fraction
and skill composition of the immigrants. We go on to compute these
correlations using city-specific outcomes for individuals in 120 major SMSA's
in the 1970 and 1980 Censuses. We also use the relative industry distributions
of immigrants and natives to provide a direct assessment of the degree of labor
market competition between them.
Our empirical findings indicate a modest degree of competition between
immigrants and less-skilled natives. A comparison of industry distributions
shows that an increase in the fraction of immigrants in the labor force
translates to an approximately equivalent percentage increase in the supply of
labor to industries in which less-skilled natives are employed. Based on this
calculation, immigrant influws between 1970 and 1980 generated 1-2 percent
increases in labor supply to these industries in most cities. A comparison of
industry distributions of less-skilled natives in high- and low-immigrant share
cities between 1970 and 1980 shows some displacement out of low-wage immigrant-intensive industries.
We find little effect of immigration on the employment outcomes of the
four race/sex groups that we consider. Our estimates of the effect of
immigration on the wages of less-skilled natives are sensitive to the
specification and estimation procedure. However, our preferred estimates,
which are based on first differences between 1980 and 1970 and the use of
instrumental variables to control for the endogeneity of immigrant inflows,
imply that an increase in immigrants equal to 1 percent of an SMSA's population
reduces native wages by roughly 1.2 percent.
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