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Parag Mahajan, Immigration and Business Dynamics: Evidence from U.S. Firms, Journal of the European Economic Association, Volume 22, Issue 6, December 2024, Pages 2827–2869, https://doi.org/10.1093/jeea/jvae022
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Abstract
This paper studies the impact of immigration on U.S. local business dynamics using a comprehensive collection of survey and administrative data. It finds heterogeneous impacts across the employer productivity distribution that favor higher-productivity firms and lead to increases in average local earnings. Responses to immigration along the exit margin are particularly important. Immigrant inflows cull establishments from low-productivity firms while preserving establishments from high-productivity firms. Overall, reduced exit accounts for 43% of immigrant-induced job creation and 41% of immigrant-induced earnings growth. A general equilibrium model proposes a mechanism that ties immigrant workers to high-productivity employers and shows how accounting for changes to the employer productivity distribution can yield substantially larger estimates of immigrant-generated economic surplus than canonical models of labor demand.
