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Title: The Sluggish Movement of Workers: Rethinking Immigration Absorption, Rybczynski effects and Wage response

Citation Type: Conference Paper

Publication Year: 2009

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Abstract: Two stylized facts have shaped the literature on how immigration has affected host countries. On the one hand, there has been a long debate on whether immigration affected significantly labor markets or not. The debate is not yet concluded, however we can argue that, if anything, immigration has had a negative impact on the wages of natives more similar to the arrived immigrants. On the other hand, and more recently, there has been convincing evidence on how immigration was absorbed in the host country. Rather than observing the expected Rybczynski effects, what different researchers have found is that firms tend to use a higher proportion of the immigrated factor type (for instance unskilled migrants), something that has been seen as a puzzle. By introducing costs of changing from one sector to the other in a two sector - two skill model I will show that most of these empirical findings can be explained rather naturally. The main mechanism is that when immigration arrives natives have incentives to change their jobs. If there are no costs to this change people will do so and immigration will not have any effect. On the contrary, if costs are high, there will be people willing to move to other jobs but they will not be able to pay for the cost of doing so. This has important consequences to how people reallocate after immigration arrives and how wages respond to immigration. The main two results of the model are, first, that immigration is partially absorbed by movements of workers between different industries and partially by changes in the factor intensity. Second, immigration increases the wage dispersion among natives. Summarizing, this research allows to combine the evidence on wages and on immigration absorption to reach new conclusions, that are then tested empirically.

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Authors: Monras, Joan

Conference Name: Spring Meeting of Young Economists

Publisher Location: Istanbul, Turkey

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Migration and Immigration

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