How low-skilled immigration is changing US prices and labor markets : three essays

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006.Includes bibliographical references (p. 109-112).This dissertation consists of three essays on the effects of low-skilled immigration on US prices and labor markets. The first essay uses confidential data from the Consumer Price Index to estimate the causal effect of low-skilled immigration on the prices of non-traded goods. Then, it combines wage and price effects with consumption patterns of native skill groups to determine the net benefits and distributional impacts of immigration on the native economy. The results suggest that a 10 percent increase in the share of low-skilled immigrants in the labor force decreases the price of immigrant-intensive services by 1.3 percent. I also find that wage effects are significantly larger for low-skilled immigrants than for low-skilled natives because the two are imperfect substitutes. Overall, the results imply that the low-skilled immigration wave of the 1990s increased the purchasing power of high-skilled natives by 0.65 percent but decreased the purchasing power of low-skilled natives by 2.66 percent. The second essay, coauthored with Jose Tessada, is motivated by the first essay's finding that low-skilled immigration reduces the prices of services such as housekeeping and babysitting. Because these services are close substitutes for home production, a decrease in their price should affect natives' time use.(cont.) Using time-use surveys, we find that low-skilled immigration has increased the consumption of market-provided household services and has decreased the time women spend on household chores. As a result, women have significantly increased their supply of market work, both at the intensive and extensive margin. We estimate that the immigration flow of the 1990s decreased by 20 minutes the time women spend daily on household chores and increased by 5 percentage points the likelihood that a woman reports working in the market. The third essay formalizes and empirically explores how immigrants' lack of English skills determines immigration's impact on the US labor market. I present a theoretical model in which low-skilled native workers can perform both "manual" and "language" tasks, immigrants perform manual tasks only, and the two tasks are q-complements. The model predicts that an immigration flow reduces the relative returns to manual skills and makes some natives shift from manual to language occupations.(cont.) Using data from the Occupation Information Network and the Census, I find that: (1) within a city, occupations that require fewer language skills have a higher ratio of low-skilled immigrants to natives, and (2) after an immigration shock, there is a disproportional reduction in the wages of natives that work in manual occupations.by Patricia Cortes.Ph.D