On Estimating The Effects of Legalization: Do Agricultural Workers Really Benefit?

The question of whether legalization affects the economic returns of immigrants has been the focus of many empirical studies in the past two decades. Their results have consistently shown that there exists significant wage differences between legal and illegal workers. However, the validity of such findings have been questioned by many researchers, given the lack of good identification strategies to correctly account for omitted variables. In this article we move away from the methods previously used in the literature, which in most part rely on selection on observables, and propose to use recently developed techniques designed specifically to address the issue of selection into treatment based (in some degree) on unobservable variables. Our results highlight that measuring such effects is much more difficult, from an econometrics standpoint, than what previous analysis claim and suggest that lower skill levels and not discrimination explain differences in economic outcomes of immigrants.