Local Labor Markets and the Empirical Evidence

The basic impetus for an analysis of the economic impact of immigrants in local labor markets flows from the fact that immigrants are highly concentrated in relatively few geographic areas. The increase in supply from additional immigration may be small at the national level, but it may be much larger in some communities with lots of immigrants. Los Angeles is a good example, since one-third of its current population is foreign-born.

The basic framework used by most local labor market studies that attempt to determine the impact of immigrants on native employment opportunities is easy to describe. For the most part, these studies compare the economic performance of natives who live in cities where few immigrants live with the economic performance of natives who live in cities where many immigrants live. If immigration truly has an adverse impact on the earnings of some native workers, we would expect to find that some natives in immigrant cities would have lower earnings or lower employment propensities (or both) than comparable natives who live in labor markets that immigrants have not yet penetrated. Of course, these comparisons require controlling for other factors that could create variation in economic performance across labor markets.35

Practically all empirical studies in the literature, beginning with the initial work of Grossman (1982), use this type of spatial comparison to measure the impact of immigration on native employment opportunities. The typical study correlates a measure of the native wage in the locality on the relative numbers of immigrants in that locality (or correlates the change in the wage in the locality over a specified time period on the change in the number of immigrants in the locality).

A number of recent studies have surveyed this extensive literature (Borjas, 1994; Friedberg and Hunt, 1995; Greenwood and McDowell, 1993). Panel A of Table 5.20 reports the Borjas summary of the representative results in this literature. The spatial correlations generally indicate that the average native wage is slightly lower in labor markets where immigrants tend to reside. The point estimates of the elasticity of the native wage with respect to the number of immigrants cluster around zero.36 Even the most negative effect found in these stud-


One of the principal difficulties involves controlling for other factors affecting wages in an area at a point in time. The problem of controlling for demand-side conditions is an obstacle in current research. Borjas et al. (1997) point out that labor markets in immigrant-intensive states, such as California, were relatively robust during the 1970s but ran into difficulty during the 1980s. As a result, changes in wages tend to be positively correlated with immigrant flows during the 1970s and negatively correlated during the 1980s.


This is by no means an exhaustive list of such studies, but the results are fairly typical of this literature. Some examples of other such studies are DeFreitas (1988), Greenwood and Hunt (1995), and Greenwood et al. (1997). Each of these authors finds small effects that cluster around zero.

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