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The Labor Market Impact of Immigration: Job Creation versus Job Competition

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  • Christoph Albert

Abstract

This paper studies the labor market effects of both documented and undocumented immigration in a search model featuring nonrandom hiring. As immigrants accept lower wages, they are preferably chosen by firms and therefore have higher job finding rates than natives, consistent with evidence found in US data. Immigration leads to the creation of additional jobs but also raises competition for natives. The dominant effect depends on the fall in wage costs, which is larger for undocumented immigration than it is for legal immigration. The model predicts a dominating job creation effect for the former, reducing natives' unemployment rate, but not for the latter.

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  • Christoph Albert, 2021. "The Labor Market Impact of Immigration: Job Creation versus Job Competition," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 35-78, January.
    • Handle: RePEc:aea:aejmac:v:13:y:2021:i:1:p:35-78
    DOI: 10.1257/mac.20190042
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    References listed on IDEAS

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    1. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
    2. Borjas, George J., 2017. "The labor supply of undocumented immigrants," Labour Economics, Elsevier, vol. 46(C), pages 1-13.
    3. Toshihiko Mukoyama & Christina Patterson & Ayşegül Şahin, 2018. "Job Search Behavior over the Business Cycle," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 190-215, January.
    4. Edwards, Ryan & Ortega, Francesc, 2017. "The economic contribution of unauthorized workers: An industry analysis," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 119-134.
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    Cited by:

    1. Edo, Anthony & Özgüzel, Cem, 2023. "The impact of immigration on the employment dynamics of European regions," Labour Economics, Elsevier, vol. 85(C).
    2. Peter, Julia & Übelmesser, Silke, 2023. "Regional Determinants of Attitudes Towards Immigrants," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277664, Verein für Socialpolitik / German Economic Association.
    3. Maffei-Faccioli, Nicolò & Vella, Eugenia, 2021. "Does immigration grow the pie? Asymmetric evidence from Germany," European Economic Review, Elsevier, vol. 138(C).
    4. Pascal Michaillat, 2023. "Modeling Migration-Induced Unemployment," Papers 2303.13319, arXiv.org, revised Dec 2024.
    5. Amior, Michael & Stuhler, Jan, 2023. "Immigration, Monopsony and the Distribution of Firm Pay," IZA Discussion Papers 16692, Institute of Labor Economics (IZA).
    6. Michael A. Clemens, 2021. "The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates," RF Berlin - CReAM Discussion Paper Series 2134, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    7. Ortega, Francesc & Connor, Phillip, 2024. "Shattered Dreams: The Economic Impact of Eliminating DACA," IZA Discussion Papers 17066, Institute of Labor Economics (IZA).
    8. Chiara Lacava, 2023. "Matching and sorting across regions," Journal of Economic Geography, Oxford University Press, vol. 23(4), pages 801-822.
    9. Parag Mahajan, 2021. "Immigration and Local Business Dynamics: Evidence from U.S. Firms," Working Papers 21-18, Center for Economic Studies, U.S. Census Bureau.
    10. Ismael Gálvez-Iniesta & José L. Groizard, 2021. "Undocumented Migration and Electoral Support: Evidence From Spain," Politics and Governance, Cogitatio Press, vol. 9(4), pages 196-209.
    11. Andri Chassamboulli & Xiangbo Liu, 2024. "Immigration, Legal Status and Fiscal Impact," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 54, October.
    12. Ali, Umair & Brown, Jessica H. & Herbst, Chris M., 2022. "Secure Communities as Immigration Enforcement: How Secure Is the Child Care Market?," IZA Discussion Papers 15821, Institute of Labor Economics (IZA).
    13. George J. Borjas & Anthony Edo, 2023. "Monopsony, Efficiency, and the Regularization of Undocumented Immigrants," NBER Working Papers 31457, National Bureau of Economic Research, Inc.
    14. Chassamboulli, Andri & Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro, 2024. "Immigration and labour market flows," Labour Economics, Elsevier, vol. 86(C).
    15. Wang, Sun Ling & Loduca, Natalie, 2023. "The changing values of the U.S. farm workers’ legal status and labor quality in the U.S. farm workforce," 2024 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2024, San Antonio, Texas 339078, Agricultural and Applied Economics Association.
    16. David Rodriguez-Justicia & Bernd Theilen, 2022. "Immigration and tax morale: the role of perceptions and prejudices," Empirical Economics, Springer, vol. 62(4), pages 1801-1832, April.
    17. Damiano Pregaldini & Uschi Backes-Gellner, 2021. "How Middle-Skilled Workers Adjust to Immigration: The Role of Occupational Skill Specificity," Economics of Education Working Paper Series 0193, University of Zurich, Department of Business Administration (IBW).
    18. Ortega, Francesc & Hsin, Amy, 2022. "Occupational barriers and the productivity penalty from lack of legal status," Labour Economics, Elsevier, vol. 76(C).
    19. Ali, Umair & Brown, Jessica H. & Herbst, Chris M., 2024. "Secure communities as immigration enforcement: How secure is the child care market?," Journal of Public Economics, Elsevier, vol. 233(C).
    20. Borjas, George J. & Edo, Anthony, 2023. "Monopsony, Efficiency, and the Regularization of Undocumented Immigrants," IZA Discussion Papers 16297, Institute of Labor Economics (IZA).
    21. Petre Patricia Petronela & Trasca Daniela Livia, 2024. "Labor Market Challenges from an European Union with Diversified Human Resources," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 18(1), pages 165-175.
    22. Michal Burzynski & Giovanni Peri, 2024. "Natives Sorting and the Impact of Immigration on European Labor Markets," LISER Working Paper Series 2024-09, Luxembourg Institute of Socio-Economic Research (LISER).

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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