GEP Seminar: Joan Llull (Autonoma Barcelona)

Labour market competition and the assimilation of immigrants (with Christoph Albert and Albrecht Glitz)

Link to paper (.pdf)

Abstract:  The wage gap between newly arriving immigrants and comparable natives in the US has widened substantially over the last few decades while the subsequent speed of convergence has declined. These patterns have led to a pessimistic view regarding wage assimilation prospects of immigrants. This paper unravels an unexplored mechanism that can explain an important part of these regularities: labor market competition. Because natives and immigrants are imperfect substitutes in production, increasing immigrant inflows exert stronger labor market competition on previous cohorts of immigrants than on natives, contributing to a widening wage gap. We quantify the importance of this mechanism by using a simple model that accounts for the main features of the literatures on the wage impact of immigration and wage assimilation. Our results suggest that, if competition and composition effects are netted out, immigrant cohorts are more positively selected in recent decades, and that these differences are wiped out after 10 years, implying a lower relative wage growth for recent cohorts.