Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis

Joan Monras (1)

1 ECON - Département d'économie (Sciences Po)

How does the US labor market absorb low-skilled immigration? I address this question using the 1995 Mexican Peso Crisis, an exogenous push factor that raised Mexican migration to the US. In the short run, high-immigration states see their low-skilled labor force increase and native low-skilled wages decrease, with an implied local labor demand elasticity of -.7. Internal relocation dissipates this shock spatially. In the long run, the only lasting consequences are for low-skilled natives who entered the labor force in high-immigration years. A simple quantitative many-region model allows me to obtain the counterfactual local wage evolution absent the immigration shock.

Keywords: Local shocks; International and internal migration; Local labor demand elasticity

Domains: Economics and Finance

Joan Monras. Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis. 2015. ⟨hal-01127022⟩