Immigration, Wages and Employment under Informal Labor Markets

Lukas Delgado-Prieto

No acr4v, SocArXiv from Center for Open Science

Abstract: This paper studies the labor market impacts of a massive inflow of Venezuelans in Colombia. By comparing areas that received different shares of migrants, I find a negative effect on wages and on local employment for natives. The negative wage effect is driven by a large drop of wages in the informal sector, where migrants are mostly employed, while the negative employment effect is driven by a reduction of employment in the formal sector, where the minimum wage is binding. To explain these results, I develop a model in which firms hire formal and informal workers with different costs. If these workers have a high degree of substitutability, and wages for formal workers are rigid, firms reallocate formal to informal employment as a response to lower informal wages. In settings with informal labor markets migration can therefore lead to asymmetric employment and wage effects across the informal and formal sectors.

Date: 2021-09-26
New Economics Papers: this item is included in nep-dev, nep-int, nep-iue, nep-mig and nep-ure
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:acr4v

DOI: 10.31219/osf.io/acr4v

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