Immigration, Endogenous Technology Adoption and Wages

CentER Discussion Paper Series No. 2015-008

TILEC Discussion Paper No. 2015-004

30 Pages Posted: 30 Jan 2015 Last revised: 4 Feb 2015

See all articles by Manish Pandey

Manish Pandey

University of Winnipeg

Amrita Ray Chaudhuri

University of Winnipeg - Department of Economics; Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg Law and Economics Center (TILEC)

Date Written: January 27, 2015

Abstract

We document that immigration to U.S. states has increased the mass of workers at the lower range of the skill distribution. We use this change in skill distribution of workers to analyze the effect of immigration on wages. Our model allows firms to endogenously respond to the immigration-induced changes in skill distribution in terms of their decisions (i) to enter different industries which require the use of different technologies; (ii) to choose across technologies that differ in their skill-intensity; and (iii) to employ workers of different skill levels. Allowing these mechanisms to interact, we find that, in line with much of the related empirical literature, immigration has a small effect on average real wages of low skilled workers for U.S. states. We further show that immigration increases the wage inequality between workers of different skill levels in all states, and that the effect of immigration on wages and wage inequality varies systematically with the volume of immigration across states.

Keywords: immigration, technology adoption, wages

JEL Classification: J61, J31, J24

Suggested Citation

Pandey, Manish and Ray Chaudhuri, Amrita, Immigration, Endogenous Technology Adoption and Wages (January 27, 2015). CentER Discussion Paper Series No. 2015-008; TILEC Discussion Paper No. 2015-004. Available at SSRN: https://ssrn.com/abstract=2557932 or http://dx.doi.org/10.2139/ssrn.2557932

Manish Pandey (Contact Author)

University of Winnipeg ( email )

Winnipeg, Manitoba R3B 2E9
Canada

Amrita Ray Chaudhuri

University of Winnipeg - Department of Economics ( email )

Winnipeg, Manitoba R3B 2E9
Canada

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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