Dynamic Responses to Immigration

The speaker analyzes 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, as well as 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 gradually as unskilled workers migrate away from heavily affected cities, skilled workers from other cities migrate to the affected cities, and workers shift toward unskilled intensive industries. Anticipated immigration inflows lead to smaller effects on wages and utility than sudden in inflows of the same magnitude. Overall, effects on lifetime utility are small.