The Sluggish Movement of Workers: Rethinking Immigration Absorption, Rybczynski effects and Wage responses∗

Short Abstract: Two stylized facts have shaped the literature on how immigration has affected host countries. On the one hand, there has been a long debate on whether immigration affected significantly labor market outcomes or not. At least two alternative methods have been used in the literature, the spatial correlation and the general equilibrium approach, reaching contradictory results. In this paper we reconcile the results if these two approaches, showing that an important aspect of immigration is that it affects differently in different industries. On the other hand, and more recently, there has been convincing evidence on how immigration is absorbed into the labor market in the host country. Rather than observing the expected Rybczynski effects, that would explain the low impact of wages found in the spatial correlation approach, what different researchers have found is that firms tend to use a higher proportion of the immigrated factor type, something that has been seen as a puzzle. By introducing costs o