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DOES IMMIGRATION REDUCE IMBALANCES AMONG LABOR MARKETS Immigration has increased dramatically in recent years, renewing concerns about the impact of immigration on the economy. One issue economists have disagreed about is the impact of immigration on the allocation of labor across markets. If immigrants move to communities with unusually strong labor demand, they may reduce imbalances in wages and employment opportunities between strong and weak markets. However, immigrants moving into communities with average or below-average labor demand may create an excess supply of workers, driving wages lower and encouraging natives to move to communities with higher-paying jobs. Bill Keeton, assistant vice president and economist at the Federal Reserve Bank of Kansas City, and Geoffrey Newton, research associate at the Bank, explore the issue in “Does Immigration Reduce Imbalances Among Labor Markets or Increase Them? Evidence from Recent Migration Flows.” The article is featured in the fourth quarter edition of the Economic Review. After examining migration flows during the second half of the 1990s, the authors find support for both views of immigration. Immigrants tended to move to markets that could be expected to experience strong growth in labor demand based on their industrial mix. At the same time, however, natives tended to stay away from markets that could have been expected to receive large inflows of immigrants based on past settlement patterns. “These findings suggest that the impact of immigration on the geographic allocation of labor is neither as adverse as immigration opponents sometimes suggest, nor as benign as immigration supporters sometimes claim,” the authors write. The article is available on the Bank’s Web site at www.kansascityfed.org.
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