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Title: Immigration, Matching, and Inequality
Citation Type: Miscellaneous
Publication Year: 2017
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Abstract: What are the distributional impacts of immigration on native workers? To answer this question, we develop a model of worker-establishment matching with a log-supermodular production function and study the impact of low-skilled immigration on native workers where immigration is defined as a matching between immigrant workers and establishments. Immigration will increase the relative supply of workers, intensifying competition among workers within establishment, and thereby reducing wages paid to native workers (matching ratio channel). However, native workers are now pushed up to be matched with establishment with higher productivity, which leads to an increase in wages for native workers (matching quality channel). The model predicts that inequality among native workers widens as more skilled native workers benefit more from this re-matching. Using Census and IPUMS American Community Survey over the period 1980-2010, we test the models predictions by exploiting the variation of stock of immigration across commuting zone-year. We demonstrate that the immigration increases inequality among native workers in the local labor markets as predicted by the model. Next, to test the matching quality channel, we decompose workers wage into components related to observable worker characteristics, establishment heterogeneity, other unobservable fixed effects, and residual variation. Using the estimated establishment heterogeneity as a proxy for native workers matching counterparts, we find that immigration induces native workers to match with more productive establishment.
Url: http://www.jaerimchoi.com/uploads/9/4/6/2/94627730/imm_matching.pdf
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Authors: Choi, Jaerim; Park, Jihyun
Publisher: University of California, Davis
Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure, Migration and Immigration
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