The Effect of Low‐Skilled Immigration on U.S. Prices: Evidence from CPI Data
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- 1 June 2008
- journal article
- Published by University of Chicago Press in Journal of Political Economy
- Vol. 116 (3), 381-422
- https://doi.org/10.1086/589756
Abstract
I exploit the large variation across U.S. cities and through time in the relative size of the low-skilled immigrant population to estimate the causal effect of immigration on prices of nontraded goods and services. Using an instrumental variables strategy, I find that, at current immigration levels, a 10 percent increase in the share of low-skilled immigrants in the labor force decreases the price of immigrant-intensive services, such as housekeeping and gardening, by 2 percent. Wage equations suggest that lower wages are a likely channel through which these effects take place. However, wage effects are significantly larger for low-skilled immigrants than for low-skilled natives, implying that the two are imperfect substitutes. (c) 2008 by The University of Chicago. All rights reserved..Keywords
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