During the 1970s and 1980s immigration, trade, and foreign investment
became increasingly important in the U.S. labor market. The number of legal
and illegal immigrants to the country increased, altering the size and
composition of the work force and substantially raising the immigrant share of
labor in gateway cities. The national origins of immigrants changed from
primarily European to Mexican, Latin American, and Asian. Foreign trade rose
relative to gross national product, and a massive trade deficit developed in
the 1980s. Foreign investment in the U.S. grew rapidly, with foreign direct
investment increasing until three percent of American workers were employed in
foreign-owned firms. Whereas once labor market analysts could look upon the
U.S. as a largely closed economy, the changes of the 1970s and 1980s brought
about the internationalization of the U.S. labor market. In this paper we
show that the first order effects of immigration on the labor market arise
primarily from the geographic variation in immigrant shares of the local labor
force. The first order effects of goods flows on the labor market arise from
industrial variation in the openness of the product market. Direct foreign
investments, though significant, do not give rise to businesses substantially
different from existing American-owned businesses. The paper also summarizes
the findings of the NBER research volume Immigration, Trade, and Labor
Markets.
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