Immigration and labour-market outcomes in the United States: a political-economy puzzle

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Abstract
Based on a larger survey of the literature (Gaston and Nelson, 2000), this paper argues: (i) that econometric research uniformly finds very small labour-market effects of immigration; (ii) that labour and trade economists have differed in their interpretation of this finding; and (iii) that this difference is driven exclusively by different dimensionality assumptions (with labour economists preferring a 1-sector xm-factor model and trade economists an n-sector x m-factor model). It is then argued that the trade economists' model, along with its presumption of factor-price insensitivity to immigration is the more useful as a presumption generator. The paper concludes with a discussion of the political-economy implications of these results.

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