| In this paper I provide estimates of the impact of immigration on native wage levels (rather than wage inequality which has been the focus of the literature). I use variation within 2-digit industries across regions using Austrian panel data from 1986 to 2004 for identification. Using an instrumental variable strategy I find large displacement effects in the service sector and large native employment increases in manufacturing. This heterogeneous response is explained by large increases in output in manufacturing, due to a high elasticity of product demand, as immigration reduces the cost of production, while on average demand is far less elastic in service industries. Estimated substitution effects, for a given level of output, are large in both industries and in line with US estimates. The fraction of immigrants went from 5% to 15% of the labor force over this period; the estimates imply this reduced average native wages by around 4.7% and resulted in 5% of the native labor force changing industry, primarily from services to manufacturing. |
