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Rethinking the Effects of Immigration on Wages


Gianmarco I.P. Ottaviano


Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Giovanni Peri


University of California, Davis - Department of Economics

August 2006

NBER Working Paper No. w12497

Abstract:     
This paper asks the following question: what was the effect of surging immigration on average and individual wages of U.S.-born workers during the period 1990-2004? We emphasize the need for a general equilibrium approach to analyze this problem. The impact of immigrants on wages of U.S.-born workers can be evaluated only by accounting carefully for labor market and capital market interactions in production. Using such a general equilibrium approach we estimate that immigrants are imperfect substitutes for U.S.- born workers within the same education-experience-gender group (because they choose different occupations and have different skills). Moreover, accounting for a reasonable speed of adjustment of physical capital we show that most of the wage effects of immigration accrue to native workers within a decade. These two facts imply a positive and significant effect of the 1990-2004 immigration on the average wage of U.S.-born workers overall, both in the short run and in the long run. This positive effect results from averaging a positive effect on wages of U.S.-born workers with at least a high school degree and a small negative effect on wages of U.S.-born workers with no high school degree.

Number of Pages in PDF File: 54

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Date posted: November 7, 2006  

Suggested Citation

Ottaviano, Gianmarco I.P. and Peri, Giovanni, Rethinking the Effects of Immigration on Wages (August 2006). NBER Working Paper No. w12497. Available at SSRN: http://ssrn.com/abstract=927381

Contact Information

Gianmarco I.P. Ottaviano
Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )
Via Gobbi 5
Milan, 20136
Italy
Giovanni Peri (Contact Author)
University of California, Davis - Department of Economics ( email )
One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)
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