Immigration and Local Business Dynamics: Evidence from U.S. Firms

Parag Mahajan

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper finds that establishment entry and exit—particularly the prevention of establishment exit—drive immigrant absorption and immigrant-induced productivity increases in U.S. local industries. Using a comprehensive collection of confidential survey and administrative data from the Census Bureau, it shows that inflows of immigrantworkers lead to more establishment entry and less establishment exit in local industries. These relationships are responsible for nearly all of long-run immigrant-induced job creation, with 78 percent accounted for by exit prevention alone, leaving a minimal role for continuing establishment expansion. Furthermore, exit prevention is not uniform: immigrant inflows increase the probability of exit by establishments from low productivity firms and decrease the probability of exit by establishments from high productivity firms. As a result, the increase in establishment count is concentrated at the top of the productivity distribution. A general equilibrium model proposes a mechanism that ties immigrantworkers to high productivity firms and shows how accounting for changes to the firm productivity distribution can yield substantially larger estimates of immigrant-generated economic surplus than canonical models of labor demand.

Keywords: Immigration; Business Dynamics; Job Creation; Productivity; Firm Heterogeneity (search for similar items in EconPapers)
JEL-codes: F22 J23 J61 L11 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2021-08
New Economics Papers: this item is included in nep-bec, nep-cwa, nep-int, nep-isf, nep-lab, nep-mig, nep-sbm, nep-tid and nep-ure
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Downloads: (external link)
https://www2.census.gov/ces/wp/2021/CES-WP-21-18.pdf First version, 2021 (application/pdf)

Related works:
Working Paper: Immigration and Business Dynamics: Evidence from U.S. Firms (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:21-18

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