Measuring Immigration's Effects on Labor Demand: A Reexamination of the Mariel Boatlift

45 Pages Posted: 21 Jul 2007

See all articles by Orn B. Bodvarsson

Orn B. Bodvarsson

Saint Cloud State University; IZA Institute of Labor Economics

Joshua J. Lewer

Bradley University

Hendrik van den Berg

University of Nebraska at Lincoln - Department of Economics; IZA Institute of Labor Economics

Date Written: July 2007

Abstract

It is now well known that exogenous immigration shocks tend to have benign effects on native employment outcomes, thanks to various secondary adjustment processes made possible by flexible markets. One adjustment process that has received scant attention is that immigrants, as consumers of the goods they help produce, contribute to their own demand. We examine the effects of an immigration shock on labor demand by testing a general equilibrium model in which imperfectly substitutable native and immigrant workers spend their wages on a locally produced good. The shock induces three responses: (i) a substitution of immigrants for natives; (ii) out-migration; and (iii) stimulation of labor demand. According to (iii), native wages can fall, stay the same or rise, depending upon the strength of the shock and various product and factor market elasticities. As our test case, we reexamine the 1980 "Mariel Boatlift," using Wacziarg's "Channel Transmission" methodology. Our data set includes approximately 6,600 observations for 1979-85 from the Current Population Survey on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities. Our results provide a more complete explanation for why the Boatlift's overall effects on native wages in Miami were benign: Lower wages due to greater labor supply were offset by higher wages due to greater labor demand. We conclude that the demand-augmenting effect of an immigration shock is a significant secondary adjustment process that must be considered when assessing the distributional effects of immigration.

Keywords: immigration, demand, wages, transmission channels

JEL Classification: J23, J61, F22

Suggested Citation

Bodvarsson, Orn B. and Lewer, Joshua J. and van den Berg, Hendrik, Measuring Immigration's Effects on Labor Demand: A Reexamination of the Mariel Boatlift (July 2007). IZA Discussion Paper No. 2919, Available at SSRN: https://ssrn.com/abstract=1001215

Orn B. Bodvarsson (Contact Author)

Saint Cloud State University ( email )

Saint Cloud, MN 56301
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Joshua J. Lewer

Bradley University ( email )

1501 West Bradley Avenue
Peoria, IL 61625
United States
309-677-2301 (Phone)
309-677-4174 (Fax)

Hendrik Van den Berg

University of Nebraska at Lincoln - Department of Economics ( email )

Lincoln, NE 68588-0489
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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