Discussion paper
DP13998 Local Adjustment to Immigrant-Driven Labor Supply Shocks
When comparing high- to low-immigrant locations, a large literature documents small effects of immigration on labor market outcomes over ten-year horizons. The literature also documents short-run negative effects of immigrant-driven labor supply shocks, at least for some groups of native workers. Taken together, those results suggests that there are mechanisms in place that help local economies recover from the short-run effects of immigrant shocks. This paper introduces a small open-city spatial equilibrium model that allows, with simple reduced form estimates of the effects of immigrant shocks on the outcomes of interest, the local adjustment to be decomposed through various channels.
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