The effects of (different types of) immigrants on labor market outcomes of (different groups of) natives

Abstract

Purpose The purpose of this paper is to study the effects of different types of immigrants on the labor market outcomes of different native groups. Design/methodology/approach The study uses a quasi-experimental approach, utilizing the border closures policy as well as political instability and economic conditions in the major countries of origin as exogenous sources of variation in the number of immigrants, to measure the effect of an immigrant-induced labor supply shock of each immigrant type (Palestinians and foreign guest workers) on the wage and employment of native workers (Israeli Arabs and Israeli Jews). Findings The effects of immigrants on local labor market outcomes vary with their origin. The different native groups, moreover, are affected differently by each type of immigrants. Specifically, a foreign-worker-induced increase in the labor supply negatively affects only the least-skilled Jewish workers. In contrast, a 10 percent Palestinian-induced increase in the labor supply increases the wage of Israeli Arabs by 3.4 percent, suggesting a net complementarity effect. Short-term slight employment adjustments occur at the intensive rather than the extensive margin. Originality/value The paper studies heterogeneous effects of immigrants by their type; also it studies heterogeneous effects experienced by different native groups. This paper informs the policy discussion about immigration and its effects on native workers.