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Immigration and Local Business Dynamics: Evidence from U.S. Firms

Author

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  • Parag Mahajan
Abstract
This paper finds that establishment entry and exit�particularly the prevention of establishment exit�drive immigrant absorption and immigrant-induced productivity increases in U.S. local industries. Using a comprehensive collection of confidential survey and administrative data from the Census Bureau, it shows that inflows of immigrantworkers lead to more establishment entry and less establishment exit in local industries. These relationships are responsible for nearly all of long-run immigrant-induced job creation, with 78 percent accounted for by exit prevention alone, leaving a minimal role for continuing establishment expansion. Furthermore, exit prevention is not uniform: immigrant inflows increase the probability of exit by establishments from low productivity firms and decrease the probability of exit by establishments from high productivity firms. As a result, the increase in establishment count is concentrated at the top of the productivity distribution. A general equilibrium model proposes a mechanism that ties immigrantworkers to high productivity firms and shows how accounting for changes to the firm productivity distribution can yield substantially larger estimates of immigrant-generated economic surplus than canonical models of labor demand.

Suggested Citation

  • Parag Mahajan, 2021. "Immigration and Local Business Dynamics: Evidence from U.S. Firms," Working Papers 21-18, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:21-18
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    File URL: https://www2.census.gov/ces/wp/2021/CES-WP-21-18.pdf
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    References listed on IDEAS

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    Cited by:

    1. Federico S. Mandelman & Mehra dup Mishita & Hewei Shen, 2024. "Skilled Immigration Frictions as a Barrier for Young Firms," FRB Atlanta Working Paper 2024-2, Federal Reserve Bank of Atlanta.
    2. Amior, Michael & Stuhler, Jan, 2023. "Immigration, Monopsony and the Distribution of Firm Pay," IZA Discussion Papers 16692, Institute of Labor Economics (IZA).
    3. Agostina Brinatti & Xing Guo, 2023. "Third-Country Effects of U.S. Immigration Policy," Staff Working Papers 23-60, Bank of Canada.
    4. Amuedo-Dorantes, Catalina & Arenas-Arroyo, Esther & Mahajan, Parag & Schmidpeter, Bernhard, 2023. "Low-Wage Jobs, Foreign-Born Workers, and Firm Performance," IZA Discussion Papers 16438, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Immigration; Business Dynamics; Job Creation; Productivity; Firm Heterogeneity;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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