Immigration and Labor Markets


Ariel Burstein

Economists have been studying the labor-market consequences of immigration for over three decades. The vast literature that has emerged has brought new theoretical perspectives to labor economics and new empirical approaches to modeling labor-market. What the literature has not produced is consensus about how labor markets respond to immigrant inflows. Which types of workers lose from immigration and which types gain? How have different regions faired in response to the arrival of large numbers of foreign-born workers?

Estimates of the impact of immigration on the wages of native-born workers appear to depend on how one defines the geographic scope of labor markets, skill groups within these labor markets, and the interchangeability of native- and foreign-born workers on the job. This variation in results suggests that there are features of regional or national labor markets that condition how they adjust to inflows of immigrant workers. Without a deeper understanding of these adjustment mechanisms, we cannot say how immigration affects regional or national labor-market outcomes.

Professors Ariel Burstein and Jonathan Vogel contribute to research on the labor-market consequences of immigration by marrying theoretical insights from international trade with empirical methods from labor economics. In a paper entitled “Tradability and the Labor-Market Impact of Immigration: Theory and Evidence from the U.S.,” they show empirically and theoretically how differences in the tradability of occupational services—think software programmers or manufacturing assembly-line workers as being on the tradable end, and dentists or janitors as being on the non-tradable end—create variation both within and between regions in how labor markets respond to an influx of immigrant workers. The more specialized a regional economy is in tradable activities, the more that economy can absorb an inflow of immigrant labor without creating strong pressures on local wages. For example, Silicon Valley can use the arrival of foreign-born engineers to expand its exports of IT services, the region may see only modest changes in its average wages following an immigration-induced increase in local labor supply.

As a result, native-born workers will vary in their exposure to immigration according how specialized their skills are in the occupations that attract foreign-born labor. A worker in construction, a sector with high immigrant presence, is likely to be more exposed to immigration inflows than is a worker in mail distribution, a sector with low immigrant presence. Burstein and Vogel’s project involve theoretical modeling of the U.S. economy, empirical estimation of the model using data on U.S. local labor markets, and quantitative modeling that characterizes impacts by region and occupation of counterfactual changes in U.S. immigration policy.