How Immigration Impacts the Destination Economy: The Evidence

Abstract

This chapter supplements the previous chapter by examining the available evidence on how immigration impacts the destination country’s labor markets. In this chapter, we discuss studies that use one of the three popular statistical modeling approaches to estimating the labor market effects of immigration: the spatial correlation method, the production function method, and the skill cell method. The spatial correlation method exploits geographic variation in immigrant concentrations and yields estimates from regressions of labor market outcomes on those concentrations. The production function method produces estimates of immigration’s impact through the estimation of factor price elasticities. The skill cell method partitions the national labor market into measured skill categories and estimates the impact of exogenous immigration to those categories. Studies applying the production function and spatial correlation methods show that immigration has little or no impact on native-born wages or employment, while the skill-cell method suggests more substantial impacts, at least in the short run.