Does Employing Undocumented Workers Give Firms a Competitive Advantage?

FRB Atlanta Working Paper Series No. 2012-02

60 Pages Posted: 16 May 2012

See all articles by David Brown

David Brown

Heriot-Watt University - Centre for Economic Reform and Transformation (CERT)

Julie L. Hotchkiss

Federal Reserve Bank of Atlanta; Georgia State University - Department of Economics

Myriam Quispe-Agnoli

Federal Reserve Bank of Atlanta

Date Written: February 2012

Abstract

Using administrative data from the state of Georgia, this paper finds that on average, among all firms, employing undocumented workers reduces a firm's hazard of exit by 19 percent. However, the impact varies greatly across sectors. In addition, a firm is at a distinct disadvantage if it does not employ undocumented workers but its rivals do. The advantage to employing undocumented workers increases as more firms in the industry do so. In addition, the advantage to a firm from employing undocumented workers decreases with the skill level of the firm's workers, increases with the breadth of a firm's market, and increases with the labor intensity of the firm's production process.

Keywords: firm survival, illegal immigrants, hazard rates, survival analysis

JEL Classification: J15, C41, J42

Suggested Citation

Brown, David and Hotchkiss, Julie L. and Quispe-Agnoli, Myriam, Does Employing Undocumented Workers Give Firms a Competitive Advantage? (February 2012). FRB Atlanta Working Paper Series No. 2012-02. Available at SSRN: https://ssrn.com/abstract=2060242 or http://dx.doi.org/10.2139/ssrn.2060242

David Brown

Heriot-Watt University - Centre for Economic Reform and Transformation (CERT) ( email )

Dept. of Economics, School of Management
Division of Accountancy and Finance School of Management
Edinburgh EH14 4AS
United Kingdom

Julie L. Hotchkiss (Contact Author)

Federal Reserve Bank of Atlanta ( email )

Research Department
1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8198 (Phone)
404-498-8058 (Fax)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

Myriam Quispe-Agnoli

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8930 (Phone)
404-498-8956 (Fax)

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