Seminar: Mathis Wagner, University of Chicago.

Titel: Understanding the Labor Market Impact of Immigration.

Abstract:

I use variation within 2-digit industries across regions using Austrian panel data from 1986 to 2004 to identify the causal effect of immigration on native wages and employment. Using an instrumental variable strategy I find large displacement effects, and modest wage reductions, in the service industry and large employment increases, and modest wage gains, in manufacturing. The literature has focused on the elasticity of substitution between types of labor, which I find to be high in services and lower in manufacturing. I find that equally important are diffrences across industries in the elasticity of demand for the final product, which I estimate as being high in manufacturing and low in services. The structural estimates suggest that a 10% increase in immigrants in Austria will result in a 0.24% fall in average wages and a shift of 0.6% of the native labor force from services to manufacturing.

Next I elaborate on my basic model to account for two further novel observations: immigration affects (1) net native employment through changes in both hire and separation rates and (2) the wages of new hires far more positively than those of incumbent workers. The innovation in my second model is that the elasticities of derived demand account for workers being able to choose what factor input to supply. My estimates suggest that the model is broadly consistent with the data. The implications are that (1) even within an industry there are large changes in relative wages due to immigration, and (2) natives respond by changing the tasks they carry out. The estimates suggest that a 10% increase in the number of immigrants, causes on average a 1.7% change in relative wages across tasks, resulting in a 2.8% shift in native relative supply of these tasks.