Immigration and Labor Market Outcomes in U.S. Metropolitan Areas

Abstract

Two broad orientations have motivated scholarship on the relationship between immigration and labor market outcomes in the United States. The first, the supply-side perspective, often focuses on how immigration affects a variety of outcomes such as unemployment, casualization, and earnings inequality. The second, the demand-side perspective, generally contends that these labor market outcomes result mainly from economic restructuring that subsequently attracts immigrants to labor markets. Previous studies have often reached divergent conclusions due to differing assumptions about the direction of causality in these relationships. In this paper, we use three-stage least squares regression, a technique that allows for nonrecursive relationships, to adjudicate the direction of causality between immigration and labor market outcomes. Using 2010 data for 366 U.S. metropolitan statistical areas, we find support for the demand-side perspective, or that economic restructuring results in higher unemployment, casualization, and earnings inequality, which subsequently increases levels of immigration in metropolitan labor markets.