Opening the Floodgates: Industry and Occupation Adjustments to Labor Immigration

42 Pages Posted: 16 Apr 2019 Last revised: 23 Apr 2019

See all articles by Bernt Bratsberg

Bernt Bratsberg

Kansas State University - Department of Economics; University of Oslo - Ragnar Frisch Centre for Economic Research

Andreas Moxnes

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Oddbjorn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research

Karen Helene Ulltveit-Moe

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: April 2019

Abstract

This paper investigates the impact of a large shock to labor supply from immigration on occupational wages, labor costs and industry growth. We develop a simple factor-proportions theory where individuals sort into occupations, and industries use occupations with different factor intensities. The model delivers an empirical framework and testable hypotheses that we confront with a rich data set on industry performance, occupational characteristics and immigration. We apply the methodology to one of the largest labor immigration shocks of the 21th century: The immigration wave to Norway after the Eastern enlargement of the European Union. We introduce a novel instrument that exploits the fact that the language requirements are significant barriers for foreign workers and these requirements vary across occupations. The results point to labor migration leading to large adjustments in relative industry employment, labor costs and wages, and these effects are particularly strong in industries that are initially intensive in the use of immigrant occupations. Finally, a quantification of the general equilibrium of our model shows that the welfare effect of immigration was close to zero for natives, but negative for the existing population of immigrants.

Keywords: Eastern enlargement, Immigration, Industry Adjustments

JEL Classification: F22, J61

Suggested Citation

Bratsberg, Bernt and Moxnes, Andreas and Raaum, Oddbjørn and Ulltveit-Moe, Karen Helene, Opening the Floodgates: Industry and Occupation Adjustments to Labor Immigration (April 2019). CEPR Discussion Paper No. DP13670, Available at SSRN: https://ssrn.com/abstract=3372869

Bernt Bratsberg (Contact Author)

Kansas State University - Department of Economics ( email )

Manhattan, KS 66502-4001
United States

University of Oslo - Ragnar Frisch Centre for Economic Research

Gaustadalleen 21
N-0349 Oslo
Norway

Andreas Moxnes

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Oddbjørn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

Karen Helene Ulltveit-Moe

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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