Authors: George J. Borjas
May 2004
John F. Kennedy School of Government, Harvard University

Immigrants tend to cluster in a small number of geographic areas. Many studies use this clustering to estimate the wage impact of immigration by relating wage rates across labor markets to some measure of immigrant penetration. These spatial correlations may not measure the true impact of immigration because the internal migration response of native workers helps to re-equilibrate local labor markets. This paper presents a theoretical and empirical study of how immigrant supply shocks influence the joint determination of wages and internal migration decisions in local labor markets. The data indicate that immigration is associated with lower wages, lower in-migration rates, higher out-migration rates, and a decline in the growth rate of the native workforce. The native migration response is sufficiently strong to attenuate the measured impact of immigration on wages in a local labor market from 40 to 60 percent, depending on whether the labor market is defined at the state or metropolitan area level.

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