Immigration, local crowd-out and undercoverage bias

Revised May 2020. Revised January 2021. Using decadal census data since 1960, I cannot reject the hypothesis that new immigrants crowd out existing residents from US commuting zones and states one-for-one. My estimate is precise and robust to numerous specifications, as well as accounting for local dynamics; and I show how it can be reconciled with apparently conflicting results in the literature. Exploiting my model's structure, I attribute 30% of the observed effect to mismeasurement, specifically undercoverage of immigrants. Based on a remarkably simple decomposition, I show that population mobility accounts for 90% of local adjustment, and labor demand the remainder. These results have important methodological implications for the estimation of immigration effects

The low skilled are less mobile geographically because of the meagre value of work

Survey evidence has shown that those with low skill levels are less likely to move. Many in academic and policy circles believe this is caused by relatively high moving costs. In new research that examines people’s motivations for moving, Michael Amior finds that the meagre value of low skilled jobs is the major factor restricting their geographical mobility. Workers have little incentive to search for jobs in other cities, and firms are reluctant to invest in long distance recruitment. As a result, he writes, low skilled workers in declining cities are often forced to move speculatively (at great cost), without a job in hand

The contribution of immigration to local labor market adjustment

The US suffers from persistent regional disparities in employment rates. In principle, these disparities should be eliminated by population mobility. Can immigration fulfill this role? Remarkably, since 1960, I show that new migrants from abroad account for 40% of the average population response to these disparities - which vastly exceeds their historic share of gross migratory flows. But despite this, immigration does not significantly accelerate local population adjustment (or reduce local employment rate disparities), as it crowds out the contribution from internal mobility. Indeed, this crowd-out can help account for the concurrent decline in internal mobility. Finally, I attribute the “excess” foreign contribution to a local snowballing effect, driven by persistent local shocks and the dynamics of migrant enclaves. This mechanism raises challenges to the (pervasive) application of migrant enclaves as an instrument for foreign inflows. But rather than abandoning the instrument, I offer an empirical strategy (motivated by my model) to overcome these challenges; and I demonstrate its efficacy

Why are higher skilled workers more mobile geographically?: the role of the job surplus

The skill gap in geographical mobility is entirely driven by workers who report moving for a new job. A natural explanation lies in the large expected surplus accruing to skilled job matches. Just as large surpluses ease the frictions which impede job search in general, they also help overcome those frictions (specifically moving costs) which plague cross-city matching in particular. I reject the alternative hypothesis that mobility differences are driven by variation in the moving costs themselves, based on PSID evidence on self-reported willingness to move. Evidence on wage processes also supports my claims

Monopsony and the wage effects of migration

In a competitive labor market, immigration affects native wages only through its impact on marginal products. Under the sole assumption of constant returns, we show that a larger supply of migrants (keeping their skill mix constant) must increase the marginal products of native-owned factors on average (an extension of the familiar “immigration surplus” result); and in the long run (if capital is supplied elastically), this surplus passes entirely to native labor. However, in a monopsonistic labor market, wages will also depend on any mark-downs applied by firms; and immigration may affect native wages through these mark-downs. We present a model of monopsony which generates testable restrictions on the null hypothesis of perfect competition, which we reject using US census data commonly studied in the literature. Our estimates suggest that the (negative) mark-down effect dominates the (by construction, positive) effect on marginal products for the average native. These findings shed new light on the interpretation of previous empirical estimates and the so-called “structural approach” to predicting wage effects

Local joblessness has persisted because of persistent job loss

A common explanation for continued economic hardship and unemployment in many cities in the U.S. is workers’ lack of ability or desire to move. In new research which examines more than 722 ‘commuting zones’, Michael Amior and Alan Manning find that many cities which have endured declining employment have also experienced large population outflows, but because of continued industrial decline, there has been little change in the local employment rate. They argue that while firms might be attracted by these cities’ low wages and slack labor markets, these advantages are ultimately undone by the large migratory outflows, which reduce the supply of labor and demand for local services

The persistence of local joblessness

Differences in employment-population ratios across US commut- ing zones have persisted for many decades. We claim these dispar- ities represent real gaps in economic opportunity for individuals of fxed characteristics. These gaps persist despite a strong migratory response, and we attribute this to high persistence in labor demand shocks. These trends generate a \race" between local employment and population: population always lags behind employment, yield- ing persistent deviations in employment rates. Methodologically, we argue the employment rate can serve as a sufficient statistic for local well-being; and we model population and employment dy- namics using an error correction mechanism, which explicitly al- lows for disequilibriu

The persistence of local joblessness

Local differences in US employment-population ratios and unemployment rates have persisted over many decades. Using decennial census data from 1950-2010, we investigate the reasons for this. The persistence cannot be explained by permanent differences in amenities, local demographic composition or the propensity of women to work. Population does respond strongly to differences in economic fortunes, although these movements are not large enough to eliminate shocks within a decade. Over the longer run, persistence in local joblessness is largely explained by serial correlation in the demand shocks themselves

Do households use home-ownership to insure themselves? Evidence across U.S. cities

Are households more likely to be homeowners when "housing risk" is higher? We show that home-ownership rates and loan-to-value (LTV) ratios at the city level are strongly negatively correlated with local house price volatility. However, causal inference is confounded by house price levels, which are systematically correlated with housing risk in an intuitive way: in cities where the land value is larger relative to the local cost of structures, house prices are higher and more volatile. We disentangle the contributions of high price levels from high volatilities by building a life-cycle model of home-ownership choices. We find that higher price levels can explain most of the lower home-ownership. Higher risk in the model leads to slightly lower home-ownership and LTV ratios in high land value cities. The relationship between LTV and risk is corroborated by LTV's negative correlation with price volatility in the data and highlights the importance of including other means of incomplete insurance in models of home-ownership

The contribution of foreign migration to local labor market adjustment

The US suffers from large regional disparities in employment rates which have persisted for many decades. It has been argued that foreign migration offers a remedy: it “greases the wheels” of the labor market by accelerating the adjustment of local population. Remarkably, I find that new migrants account for 30 to 60 percent of the average population response to local demand shocks since 1960. However, population growth is not significantly more responsive in locations better supplied by new migrants: the larger foreign contribution is almost entirely offset by a reduced contribution from internal mobility. This is fundamentally a story of “crowding out”: I estimate that new foreign migrants to a commuting zone crowd out existing US residents one-for-one. The magnitude of this effect is puzzling, and it may be somewhat overstated by undercoverage of migrants in the census. Nevertheless, it appears to conflict with much of the existing literature, and I attempt to explain why. Methodologically, I offer tools to identify the local impact of immigration in the context of local dynamics