The impact of immigrant dynasties on wage inequality

Abstract

I construct a set of dynamic macroeconomic models to analyze the effect of unskilled immigration on wage inequality. The immigrants or their descendants do not remain unskilled – over time they may approach or exceed the general level of educational attainment. In the baseline model, the economy's capital supply is determined endogenously by the savings behavior of infinite-lived dynasties, and I also consider models in which the supply of capital is perfectly elastic, or exogenously determined. I derive a simple formula that determines the time discounted value of the skill premium enjoyed by college-educated workers following a change in the rate of immigration for unskilled workers, or a change in the degree or rate at which unskilled immigrants become skilled. I compare the calculations of the skill premiums to data from the US Current Population Survey to determine the long-run effect of different immigrant groups on wage inequality in the United States.

Citation

Ben-Gad, M. (2006), "The impact of immigrant dynasties on wage inequality", Polachek, S.W., Chiswick, C. and Rapoport, H. (Ed.) The Economics of Immigration and Social Diversity (Research in Labor Economics, Vol. 24), Emerald Group Publishing Limited, Leeds, pp. 77-134. https://doi.org/10.1016/S0147-9121(05)24003-7