Working Paper

Dynamic Responses to Immigration

Abstract: I analyze the dynamic effects of immigration by estimating an equilibrium model of local labor markets in the US. The model includes firms in multiple cities and sectors which combine capital, skilled and unskilled labor in production, and forward-looking workers who choose their sector and location each period as a dynamic discrete choice. A counterfactual unskilled immigration inflow leads to an initial wage drop for unskilled workers and a wage increase for skilled workers. These effects dissipate rapidly as unskilled workers migrate away from heavily affected cities and workers shift toward unskilled intensive industries. Effects on lifetime utility are small.

Keywords: Immigration; Labor market dynamics; Local labor markets;

JEL Classification: J2; J31; J62;

https://doi.org/10.21034/iwp.6

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2018-01-29

Number: 6

Pages: 54 pages