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Dynamic Responses to Immigration

Mark Colas

No 6, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: I analyze the dynamic effects of immigration by estimating an equilibrium model of local labor markets in the US. The model includes firms in multiple cities and sectors which combine capital, skilled and unskilled labor in production, and forward-looking workers who choose their sector and location each period as a dynamic discrete choice. A counterfactual unskilled immigration inflow leads to an initial wage drop for unskilled workers and a wage increase for skilled workers. These effects dissipate rapidly as unskilled workers migrate away from heavily affected cities and workers shift toward unskilled intensive industries. Effects on lifetime utility are small.

Keywords: Labor market dynamics; Immigration; Local labor markets (search for similar items in EconPapers)
JEL-codes: J31 J2 J62 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2018-01-29, Revised 2018-01-29
New Economics Papers: this item is included in nep-dge, nep-int, nep-mig and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:0006

DOI: 10.21034/iwp.6

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