Immigration, Wages, and Employment under Informal Labor Markets

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August 2022
Paper author(s): 
Lukas Delgado-Prieto
Demographic Economics - Migration

This paper studies the labor market impacts of Venezuelan immigrants in Colombia. Exploiting spatial variation in exposure, I find a negative effect on native wages driven by the informal sector (where immigrants are concentrated) and a reduction in native employment in the formal sector (where the minimum wage binds for many workers). To explain this asymmetry, I build a model in which firms substitute formal for informal labor in response to lower informal wages. Consistent with the model’s predictions, I document that the increase in informality is driven by small firms that use both labor types in production.


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