Seminar_The Effect of Immigration on the Distribution of Wages_Christian Dustmann, University College London.

Title: The Effect of Immigration on the Distribution of Wages.

Abstract: This paper analyses the effect immigration has on wages of native workers. Unlike most previous work, we estimate the wage effects along the
distribution of wages. We argue that estimation strategies which rely on pre-allocating immigrants to particular skill cells may be problematic as immigrants downgrade considerably upon arrival, and we provide evidence for this for the UK. Based on a theoretical model, we propose a flexible empirical strategy that does not rely on allocation of immigrants to skill groups. We find that immigration depresses wages below the 20th percentile of the wage distribution, but leads to slight wage increases in the upper part of the wage distribution. The overall effect of immigration is positive. This is in line with a theory, where immigration changes the skill structure of the work force, and capital supply is elastic. However, the positive wage effects we find are, although modest, too large to be explained by an immigration surplus, as our model simulations illustrate. We suggest a number of alternative explanations.