Immigration and Natives ' Wages: Understanding Their Correlation in the 1980s

Abstract: Major papers on immigration's wage impacts in the 1980s concluded that immigration into the U.S. modestly reduced the wages of natives. Authors based these conclusions on fixed-effects models that controlled for area-specific shocks. Without those fixed effects, however, these authors found positive cor-relations between immigration and wages. This study examines two specific shocks that might explain this counterintuitive result: changes in the industry structure of labor demand and differences in inflation rates among metropoli-tan areas. The study finds no evidence that the first shock matters for under-standing immigration, but finds that a large proportion of the positive correla-tion between immigration and wages disappears if one controls for differences in inflation rates. I