Are Immigrants a Shot in the Arm for the Local Economy?

69 Pages Posted: 27 Apr 2015

See all articles by Gihoon Hong

Gihoon Hong

Indiana University South Bend

John McLaren

University of Virginia; NBER

Date Written: April 2015

Abstract

Most research on the effects of immigration focuses on the effects of immigrants as adding to the supply of labor. By contrast, this paper studies the effects of immigrants on local labor demand, due to the increase in consumer demand for local services created by immigrants. This effect can attenuate downward pressure from immigrants on non-immigrants' wages, and also benefit non-immigrants by increasing the variety of local services available. For this reason, immigrants can raise native workers' real wages, and each immigrant could create more than one job. Using US Census data from 1980 to 2000, we find considerable evidence for these effects: Each immigrant creates 1.2 local jobs for local workers, most of them going to native workers, and 62% of these jobs are in non-traded services. Immigrants appear to raise local non-tradables sector wages and to attract native-born workers from elsewhere in the country. Overall, it appears that local workers benefit from the arrival of more immigrants.

Suggested Citation

Hong, Gihoon and McLaren, John, Are Immigrants a Shot in the Arm for the Local Economy? (April 2015). NBER Working Paper No. w21123. Available at SSRN: https://ssrn.com/abstract=2599389

Gihoon Hong (Contact Author)

Indiana University South Bend ( email )

South Bend, IN 46634
United States

John McLaren

University of Virginia ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
434-924-3994 (Phone)
434-982-2904 (Fax)

NBER

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