This paper studies the labor market effects of both documented and undocumented immigration in a search model featuring nonrandom hiring. As immigrants accept lower wages, they are preferably chosen by firms and therefore have higher job finding rates than natives, consistent with evidence found in US data. Immigration leads to the creation of additional jobs but also raises competition for natives. The dominant effect depends on the fall in wage costs, which is larger for undocumented immigration than it is for legal immigration. The model predicts a dominating job creation effect for the former, reducing natives’ unemployment rate, but not for the latter. (JEL E24, J15, J23, J31, J61, M51)
We analyze a multiyear, multicountry entrepreneurship survey with more than one million observations to identify startups with low and high growth potential. We confirm the validity of these ex ante measures with ex post firm-level information on employment growth. We find that negative aggregate financial shocks reduce all startup types, but their effect is significantly stronger for startups with high growth potential, especially when GDP growth is low. Our results uncover a new composition of entry channel that significantly reduces employment growth and is potentially important for explaining slow recoveries after financial crises.
We study the effects of climate change on labor and capital reallocation across regions, sectors and firms. We use newly digitized administrative reports on extreme weather events occurred in Brazil during the last two decades and a meteorological measure of excess dryness relative to historical averages to estimate the effects of droughts in the local economy of affected areas, on the magnitude of the labor and capital flows they generate and on factor allocation in destination regions. We document two main results. In the short run, local economies insure themselves against negative weather shocks via financial integration with other regions. However, in the long run, affected regions experience capital outflows driven by a reduction in loans, consistent with a permanent decrease in investment opportunities. Second, we find that abnormal dryness affects the structure of both the local economy and the economy of areas connected via migrant networks. Directly affected areas experience a sharp reduction in population and employment, concentrated in agriculture and services. While local manufacturing absorbs some of the displaced workers, these regions experience large out-migration flows. Regions receiving climate migrants expand employment in agriculture and services, but not in manufacturing. Using social security data, we provide evidence that labor market frictions direct migrants to firms connected to migrant social networks, which are mostly outside the manufacturing sector. This has implications for the composition of economic activity and the firm size distribution in destination regions.
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