Substitution Between Immigrants, Natives, and Skill Groups
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.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
“Comment: Substitution between Immigrants, Natives, and Skill Groups.” Journal of the European Economic Association, 10(1), 2012. (with George Borjas and Jeffrey Grogger)