Journal
JOURNAL OF POLITICAL ECONOMY
Volume 116, Issue 3, Pages 381-422Publisher
UNIV CHICAGO PRESS
DOI: 10.1086/589756
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I exploit the large variation across U. S. cities and through time in the relative size of the low-skilled immigrant population to estimate the causal effect of immigration on prices of nontraded goods and services. Using an instrumental variables strategy, I find that, at current immigration levels, a 10 percent increase in the share of low-skilled immigrants in the labor force decreases the price of immigrant-intensive services, such as housekeeping and gardening, by 2 percent. Wage equations suggest that lower wages are a likely channel through which these effects take place. However, wage effects are significantly larger for low-skilled immigrants than for low-skilled natives, implying that the two are imperfect substitutes.
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