Full Citation
Title: The Labor Market Impact of Undocumented Immigrants: Job Creation vs. Job Competition
Citation Type: Working Paper
Publication Year: 2017
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Abstract: This paper presents novel evidence on the effect of legal status on workers labor market outcomes in the US and explores the impact of undocumented immigration in a labor market model featuring search frictions and non-random hiring. Firms receive applications from documented and undocumented workers and hire the worker they can extract the largest surplus from. As undocumented workers have a lower reservation wage due to their ineligibility for unemployment benefits, lower wage bargaining power and risk of being detected and removed, their wages are lower and job finding rates higher, which is consistent with the empirical evidence. An increase in the share of undocumented immigrants leads to the creation of additional jobs, but also more competition for documented job seekers. When calibrated to US data, the job creation effect dominates and undocumented immigration benefits documented workers. An increase in the removal rate mutes job creation and thus lowers the job finding rate of all workers. This detrimental effect is even larger if the removal rate increases more for employed workers (e.g. through worksite raids) because this leads to a risk premium in their wages. Using the introduction of statewide omnibus immigration laws as a measure of increased removal risk, I find evidence for muted job creation and a risk premium in immigrants wages.
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Authors: Albert, Christoph
Series Title: CESifo Working Paper Series
Publication Number: 6575
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Pages: 56
Publisher Location: Munich
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure, Migration and Immigration
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