The impact of immigration on labor market outcomes and foreign direct investment

This dissertation studies the impacts of immigration on labor market outcomes and foreign direct investment (FDI). Theoretically, we find that immigrants can help or harm native workers depending on the number of immigrants, the skill similarity between native and migrant workers, and production technology. When there are few migrants, they compete with natives in a labor submarket in which they have comparative advantage. The labor market can become completely segmented when there are large enough numbers of immigrants. In this case, immigrants are complements to native workers and can increase native wages. However, too many immigrants will harm natives as immigrants compete for jobs in the submarket that was once exclusively occupied by natives, especially when immigrants are similar to natives in terms of skill. Moreover, if the output elasticity of the intermediate good in which immigrants have a comparative advantage is high, most (native and migrant) labor will be concentrated and compete in the production of this intermediate good. In this case, it is less likely that the labor market becomes completely segmented. Thus, native wages tend to be lower than the preimmigration level.; Empirically, we use a geographic approach to study the impacts of Burmese immigrants on the Thai labor market. We solve the endogeneity problem by using the two-stage least squares method (2SLS). Distance from the border to a province, for example, is used as an instrument for the density of immigrants in that province. Our estimates suggest no significant effect of migration on native wages but a negative impact on native unemployment rates. A 1-percent increase in the migrant-native ratio of a province is estimated to raise its unemployment rate by 0.5 percent. Those most affected by the immigration are the unskilled, the young and agricultural workers.; Finally, motivated by Helpman (1984) we use the Edgeworth Box to show that immigrants may increase or decrease FDI. This is because the increase in labor supply through immigration increases the marginal product of capital and thus attracts more FDI. However, immigrants increase labor supply in the economy and depress wages. This offsets the incentives for FDI inflows as firms substitute labor for capital.