Who competes with whom? Using occupation characteristics to estimate the impact of immigration on native wages

Many studies have examined the impact of immigration on native wages. Some of these studies have relied upon education-experience groups to define labor markets and identify the wage elasticity with respect to immigrant labor supply. However, evidence suggests that immigrants’ educational attainment is treated differently in the labor market and constructing labor markets based upon this characteristic leads to potentially biased conclusions. We utilize O*NET occupational characteristics to form a different set of labor markets. Our analysis finds higher partial equilibrium effects on native wages than prior work using education-experience skill groups, as expected. These larger effects, however, are shown to be concentrated on the least skilled natives. Estimates of the total wage effect along the distribution of occupational skills confirm that the negative wage effect is concentrated on native workers in the bottom tail of the distribution. Natives in the upper tail of the distribution experience wage gains as a result of immigration. The distributional impact is likely due to the distribution of skills among recent immigrants.