Substitution Between Immigrants, Natives, and Skill Groups

NBER Working Paper No. 17461

Issued in September 2011

NBER Program(s):International Trade and Investment, Labor Studies



The wage impact of immigration depends crucially on the elasticity of substitution between similarly skilled immigrants and natives and the elasticity of substitution between high school dropouts and graduates. This paper revisits the estimation of these elasticities. The U.S. data indicate that equally skilled immigrants and natives are perfect substitutes. The value of the second elasticity depends on how one controls for changes in demand that have differentially affected high school dropouts and graduates. The groups are imperfect substitutes under standard trend assumptions, but even slight deviations from these assumptions can lead to an outright rejection of the CES framework.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w17461

Published: “Comment: Substitution between Immigrants, Natives, and Skill Groups.” Journal of the European Economic Association, 10(1), 2012. (with George Borjas and Jeffrey Grogger)

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