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This paper reviews the recent evidence on U.S. immigration, focusing on two key questions: (1) Does immigration reduce the labor market opportunities of less-skilled natives? (2) Have immigrants who arrived after the 1965 Immigration Reform Act successfully assimilated? Looking across major cities, differential immigrant inflows are strongly correlated with the relative supply of high school dropouts. Nevertheless, data from the 2000 Census shows that relative wages of native dropouts are uncorrelated with the relative supply of less-educated workers, as they were in earlier years. At the aggregate level, the wage gap between dropouts and high school graduates has remained nearly constant since 1980, despite supply pressure from immigration and the rise of other education-related wage gaps. Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant. On the question of assimilation, the success of the U.S.-born children of immigrants is a key yardstick. By this metric, post-1965 immigrants are doing reasonably well: second generation sons and daughters have higher education and wages than the children of natives. Even children of the leasteducated immigrant origin groups have closed most of the education gap with the children of

The paper develops a tractable econometric model of optimal migration, focusing on expected income as the main economic influence on migration. The model improves on previous work in two respects: it covers optimal sequences of location decisions (rather than a single once-for-all choice), and it allows for many alternative location choices. The model is estimated using panel data from the NLSY on white males with a high school education. Our main conclusion is that interstate migration decisions are influenced to a substantial extent by income prospects. The results suggest that the link between income and migration decisions is driven both by geographic differences in mean wages and by a tendency to move in search of a better locational match when the income realization in the current location is unfavorable.

Conventional hedonic techniques for estimating the value of local amenities rely on the assumption that households move freely among locations. We show that when moving is costly, the variation in housing prices and wages across locations may no longer reflect the value of differences in local amenities. We develop an alternative discrete-choice approach that models the household location decision directly, and we apply it to the case of air quality in U.S. metro areas in 1990 and 2000. Because air pollution is likely to be correlated with unobservable local characteristics such as economic activity, we instrument for air quality using the contribution of distant sources to local pollution – excluding emissions from local sources, which are most likely to be correlated with local conditions. Our model yields an estimated elasticity of willingness to pay with respect to air quality of 0.34 to 0.42. These estimates imply that the median household would pay $149 to $185 (in constant 1982-1984 dollars) for a one-unit reduction in average ambient concentrations of particulate matter. These estimates are three times greater than the marginal willingness to pay estimated by a conventional hedonic model using the same data. Our results are robust to a range of covariates, instrumenting strategies, and functional form assumptions. The findings also confirm the importance of instrumenting for local air pollution.

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Our analysis of migration differs from previous research in three important aspects. First, we exploit the confidential geocoding in the NLSY79 to obtain a distance-based measure. Second, we let the effect of migration on wage growth differ by schooling level. Third, we use propensity score matching to address selection issues. An economic model helps us determine the variables included in the propensity score. Our data set provides a rich array of variables on which to match. We find a significant effect of migration on the wage growth of college graduates of 10 percent, and a marginally significant effect for high school dropouts of –12 percent. If we use either a measure of migration based on moving across county lines or state lines, the significant effects of migration for college graduates and dropouts disappear.

This paper quantifies the effects of trade liberalization on local labor market outcomes and workers ’ migration patterns. I extend the classic specific-factors model to examine the impact of national price changes on local labor markets. The model describes how tariff changes across industries affect wages in local labor markets within the liberalizing country. In particular, wages will fall in regions whose workers are concentrated in industries facing the largest tariff cuts, and workers will then migrate away from these regions in favor of areas facing smaller tariff cuts. This result provides a theoretical foundation for a prevalent empirical approach in previous studies of local labor markets and lends economic interpretations to estimates that allow the researcher to evaluate the magnitude of results along with their direction. I then use these theoretical results to measure how Brazil’s 1987-1995 trade liberalization affected wages and interstate migration within the country. I find that regions whose output faced a 10 % larger liberalization-induced price decline experienced a 7 % larger wage decline. In addition, liberalization resulted in a substantial shift in migration patterns. The most affected Brazilian states gained or lost approximately 2 % of their populations as a result of liberalizationinduced shifts in migration patterns. These results demonstrate the empirical value of the specific-factors framework developed here and represent the first systematic evaluation of the effects of liberalization on internal migration.

Abstract. A large literature has documented a significant increase in the difference between the wage of college graduates and high school graduates over the past 30 years. I show that from 1980 to 2000, college graduates have experienced relatively larger increases in cost of living, because they have increasingly concentrated in metropolitan areas that are characterized by a high cost of housing. When I deflate nominal wages using a location-specific CPI, I find that the difference between the wage of college graduates and high school graduates is lower in real terms than in nominal terms and has grown less. At least 22 % of the documented increase in college premium is accounted for by spatial differences in the cost of living. The implications of this finding for changes in well-being inequality depend on why college graduates sort into expensive cities. Using a simple general equilibrium model of the labor and housing markets, I consider two alternative explanations. First, it is possible that the relative supply of college graduates increases in expensive cities because college graduates are increasingly attracted by amenities located in those cities. In this case, the higher cost of housing reflects consumption of desirable local amenities, and there may still be a significant increase in well-being inequality even if the increase in real wage inequality is limited. Alternatively, it is possible that the relative demand for college graduates increases in

I introduce a repeated two-sided matching game. Both workers and firms are forward looking, have perfect information about all potential partners, and can switch matches each period. Wages are determined each period in a transferable utility matching game that equates supply and demand for each position. Estimation takes about as much computer time as solving the game once. I use data on almost all elite Swedish engineers in the private sector from 1970–1990 to examine the relationship between market thickness and switching. A counterfactual experiment investigates how many workers a new entrant firm can hire through voluntary switching in the absence of incumbent firms shutting down and laying off workers.