Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession

51 Pages Posted: 1 Aug 2013

See all articles by Brian C. Cadena

Brian C. Cadena

University of Colorado at Boulder - Department of Economics

Brian Kovak

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: August 2013

Abstract

This paper demonstrates that low-skilled Mexican-born immigrants' location choices in the U.S. respond strongly to changes in local labor demand, and that this geographic elasticity helps equalize spatial differences in labor market outcomes for low-skilled native workers, who are much less responsive. We leverage the substantial geographic variation in employment losses that occurred during Great Recession, and our results confirm the standard finding that high-skilled populations are quite geographically responsive to employment opportunities while low-skilled populations are much less so. However, low-skilled immigrants, especially those from Mexico, respond even more strongly than high-skilled native-born workers. These results are robust to a wide variety of controls, a pre-recession falsification test, and two instrumental variables strategies. Moreover, we show that natives living in metro areas with a substantial Mexican-born population are insulated from the effects of local labor demand shocks compared to those in places with few Mexicans. The reallocation of the Mexican-born workforce reduced the incidence of local demand shocks on low-skilled natives' employment outcomes by roughly 40 percent.

Suggested Citation

Cadena, Brian C. and Kovak, Brian, Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession (August 2013). NBER Working Paper No. w19272, Available at SSRN: https://ssrn.com/abstract=2304698

Brian C. Cadena (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
3034927908 (Phone)

HOME PAGE: http://spot.colorado.edu/~cadenab/Home.html

Brian Kovak

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

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