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Undocumented Worker Employment and Firm Survival

Author

Listed:
  • Brown, J. David

    (U.S. Census Bureau)

  • Hotchkiss, Julie L.
  • Quispe-Agnoli, Myriam

    (Federal Reserve Bank of Atlanta)

Abstract

Do firms employing undocumented workers have a competitive advantage? Using administrative data from the state of Georgia, this paper investigates the incidence of undocumented worker employment across firms and how it affects firm survival. Firms are found to engage in herding behavior, being more likely to employ undocumented workers if competitors do. Rivals' undocumented employment harms firms' ability to survive, while firms' own undocumented employment strongly enhances their survival prospects. This suggests that firms enjoy cost savings from employing lower-paid undocumented workers at wages less than their marginal revenue product. The herding behavior and competitive effects are found to be much weaker in geographically broad product markets, where firms have the option to shift labor-intensive production out of state or abroad.

Suggested Citation

  • Brown, J. David & Hotchkiss, Julie L. & Quispe-Agnoli, Myriam, 2009. "Undocumented Worker Employment and Firm Survival," IZA Discussion Papers 3936, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3936
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    References listed on IDEAS

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    Cited by:

    1. Erol Taymaz, 2009. "Informality and Productivity: Productivity Differentials between Formal and Informal Firms in Turkey," ERC Working Papers 0901, ERC - Economic Research Center, Middle East Technical University, revised Mar 2009.
    2. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    3. Julie Whitaker, 2009. "Mexican Deaths in the Arizona Desert: The Culpability of Migrants, Humanitarian Workers, Governments, and Businesses," Journal of Business Ethics, Springer, vol. 88(2), pages 365-376, September.
    4. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2009. "Employer monopsony power in the labor market for undocumented workers," FRB Atlanta Working Paper 2009-14, Federal Reserve Bank of Atlanta.

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    More about this item

    Keywords

    monopsony; firm dynamics; undocumented workers; immigration policy;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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