The Effects of Immigration on the Economy: Lessons from the 1920s Border Closure

NBER Working Paper No. 26536

Issued in December 2019, Revised in June 2020

NBER Program(s):, Labor Studies, Development of the American Economy



In the 1920s, the United States substantially reduced immigrant entry by imposing country-specific quotas. We compare local labor markets with more or less exposure to the national quotas due to differences in initial immigrant settlement. A puzzle emerges: the earnings of existing US-born workers declined after the border closure, despite the loss of immigrant labor supply. We find that more skilled US-born workers – along with unrestricted immigrants from Mexico and Canada – moved into affected urban areas, completely replacing European immigrants. By contrast, the loss of immigrant workers encouraged farmers to shift toward capital-intensive agriculture and discouraged entry from unrestricted workers.

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Document Object Identifier (DOI): 10.3386/w26536