The Impact of New Immigration on Native Wages: A Cross-Occupation Analysis of a Small Open Economy

47 Pages Posted: 14 Sep 2011

See all articles by Heiwai Tang

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); The University of Hong Kong - Faculty of Business and Economics; CESIfo; Kiel Institute for the World Economy

Stan Hok-Wui Wong

affiliation not provided to SSRN

Date Written: May 1, 2011

Abstract

This paper examines how immigration affects native wages by exploiting an unexpected episode of immigrant influx. The episode happened in Hong Kong, when its government unexpectedly relaxed the restriction on immigration from mainland China in 1993, resulting in a seven-fold increase in the net inflow of Chinese immigrants between 1992 and 1993. We use variation in the employment share of immigrants across occupations for identification. To tackle endogeneity between wages and immigrant inflows across occupations, we use Welch’s (1999) congruence indices, which capture the degree of substitutability between workers from different skill groups, to construct instruments for the prevalence of Chinese immigrants in an occupation. Using micro-level data, our two-stage-least-squares estimates show that a 1 percentage point increase in the ratio of new Chinese immigrants to natives decreases native monthly real wages in the same occupation by 2.8-3.6 percents (controlling for immigrant shocks in similar occupations). Within an occupation, female and more skilled native workers experience more adverse wage impact, reflecting a high switching cost associated with occupation-specific human capital.

Keywords: Immigration, labor market outcomes, occupation-specific human capital

JEL Classification: F22, J61

Suggested Citation

Tang, Heiwai and Wong, Stan Hok-Wui, The Impact of New Immigration on Native Wages: A Cross-Occupation Analysis of a Small Open Economy (May 1, 2011). Centro Studi Luca d'Agliano Development Studies Working Paper No. 308, Available at SSRN: https://ssrn.com/abstract=1926806 or http://dx.doi.org/10.2139/ssrn.1926806

Heiwai Tang (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

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Washington, DC 20036-1984
United States

The University of Hong Kong - Faculty of Business and Economics ( email )

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Hong Kong
China

CESIfo ( email )

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Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Stan Hok-Wui Wong

affiliation not provided to SSRN ( email )

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