DP14165 The Effects of Immigration on the Economy: Lessons from the 1920s Border Closure

Author(s): Ran Abramitzky, Philipp Ager, Leah Boustan, Elior David Cohen, Casper Worm Hansen
Publication Date: December 2019
Keyword(s): Immigration Restrictions, labor mobility, Local Labor Markets
JEL(s): J61, J70, N32
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14165

In the 1920s, the United States substantially reduced immigrant entry by imposing country-specific quotas. We compare local labor markets with more or less exposure to the national quotas due to differences in initial immigrant settlement. A puzzle emerges: the earnings of existing US-born workers decline after the border closure, despite the loss of immigrant labor supply. We find that more skilled US-born workers - along with unrestricted immigrants from Mexico and Canada - move into affected urban areas, completely replacing European immigrants. By contrast, the loss of immigrant workers encouraged farmers to shift toward capital-intensive agriculture and discourage entry from unrestricted workers.