The Dynamic Impact of Immigration on Natives' Labor Market Outcomes: Evidence from Israel

42 Pages Posted: 18 Nov 2004

See all articles by Sarit Cohen-Goldner

Sarit Cohen-Goldner

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics

M. Daniele Paserman

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 2004

Abstract

This Paper studies the dynamic impact of mass migration from the Former Soviet Union to Israel on natives' labor market outcomes. Specifically, we attempt to distinguish between the short-run and long-run effects of immigrants on natives' wages and employment. The transition of immigrants into a new labor market is a gradual process: the dynamics of this process come from immigrants' occupational mobility and from adjustments by local factors of production. Natives may, therefore, face changing labor market conditions, even years after the arrival of the immigrants. If immigrants are relatively good substitutes for native workers, we expect that the impact of immigration will be largest immediately upon the immigrants' arrival, and may become smaller as the labor market adjusts to the supply shock. Conversely, if immigrants upon arrival are poor substitutes for natives because of their lack of local human capital, the initial effect of immigration is small, and the effect increases as immigrants acquire local labor market skills and compete with native workers. We empirically examine these alternative hypotheses using data from Israel's Labor Force and Income Surveys from 1989 to 1999. We find that wages of both men and women are negatively correlated with the fraction of immigrants with little local experience in a given labor market segment. A 10% increase in the share of immigrants lowers natives' wages in the short-run by 1 to 3%, but this effect dissolves after 4 to 7 years. This result is robust to a variety of different segmentations of the labor market, to the inclusion of cohort effects, and to different dynamic structures in the residual term of the wage equation. On the other hand, we do not find any effect of immigration on employment, neither in the short nor in the long-run.

Keywords: Labor demand, labor supply, segmented labor markets, immigration

JEL Classification: F22, J00, J21, J30, J61

Suggested Citation

Cohen-Goldner, Sarit and Paserman, M. Daniele, The Dynamic Impact of Immigration on Natives' Labor Market Outcomes: Evidence from Israel (September 2004). Available at SSRN: https://ssrn.com/abstract=622081

Sarit Cohen-Goldner

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 531 8948 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

M. Daniele Paserman (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3365 (Phone)
+972 2 581 6071 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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