The Dynamics of Immigration and Wages
Posted: 10 May 2010
Date Written: March 10, 2010
There is considerable debate in the literature about the effects of immigration on workers' labor market outcomes. This paper presents a new approach to the analysis of the relationship between immigration and wages based on a panel vector autoregression (VAR). The VAR analysis of a panel of US states shows that immigration does not have a significant effect on wages or internal migration. By contrast, wages do affect immigration: a 10 percent increase in wages causes up to a 20 percent increase in immigrant inflow. The effect is strongest for low-skill immigrants while it is small and insignificant for high-skill immigrants.
Keywords: immigration, internal migration, wages, panel vector autoregression
JEL Classification: J01, J20, J30, J61
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