Rethinking the Gains from Immigration: Theory and Evidence from the U.S.

Recent influential empirical work has emphasized the negative impact immigrants have on the wages of US-born workers, arguing that immigration harms less educated American workers in particular and all US-born workers in general. The authors introduce such a production function, making the crucial assumption that US and foreign-born workers with similar education and experience levels may nevertheless be imperfectly substitutable, and allowing for endogenous capital accumulation.