Edited by Peter Nijkamp, Jacques Poot and Mediha Sahin
Chapter 3: The effects of immigration on US wages and rents: a general equilibrium approach*
The literature on the economic impact of immigrants in the US has been mainly focused on native labor market outcomes (Borjas, 2003; Borjas, 2006; Borjas and Katz, 2005; Card, 2009; Ottaviano and Peri, forthcoming). The effects of immigration on local housing prices (Saiz, 2003, 2005) and on the prices of other non-tradable local services (Cortes, 2008) have also been analyzed, but very few studies combine the wage and price effects to evaluate the overall impact of immigrants on the real income of natives. This is what we do in the present chapter. In so doing, we extend previous work of ours (Ottaviano and Peri, 2005 and 2006a) in two complementary directions. First, we analyze the specific impacts of immigration on workers of different educational levels (‘skills’). Second, we model the housing and residential choices of each skill group to study how they are affected by immigration. After a review of the literature on the regional effects of immigration on wages and housing prices, the chapter first presents some new empirical results on the relation between immigration and wages/rents across US metropolitan residents, using census data from 1970 to 2000 and data from the American Community Survey for 2005. This analysis establishes a positive and significant relationship between the net inflow of foreign-born city dwellers and changes in the average wage and rents of natives across US metropolitan areas.
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