Low Skilled Local Labor Demand Shocks and Labor Market Outcomes: Evidence from the Mexican Tequila Crisis

Monras, Joan

How does immigration affect natives local wages? A vast literature considers this, much of it focused on Mexican immigration to the United States. Prior work emphasizes the importance of instrumenting for immigrant destinations, the key role of experience-skill cells, and the potential for spillovers to national markets. I build on these, using the Mexican ’Tequila Crisis’ of the mid-1990s as an exogenous shock to immigration. Instrumentation thus includes both a time dimension for the shock period, plus a destination dimension as in prior work. The 1.5% immigration shock of the Tequila Crisis lowered the wages of young low skilled US natives by 1 to 1.5 percent. It also prompted interstate labor reallocation. The share of low skilled workers is estimated to decrease by 2 percentage points as a result of the shock. This explains why within five years, national markets adjust, leaving no evidence of differential spatial impact.



More About This Work

Academic Units
Department of Economics, Columbia University
Department of Economics Discussion Papers, 1213-24
Published Here
June 17, 2013