Immigrant-native wage gaps in time series: Complementarities or composition effects?

This study investigates the role of immigrant composition in creating the observed negative correlation between immigrant supply and immigrant wages in US time series, which has recently been interpreted as evidence of immigrant-native complementarities in production. The main finding is that compositional effects fully explain this empirical pattern. Newlyarrived immigrants, notably Latin Americans, earn less than previous immigrants. Hence their presence decreases average immigrant wages, mechanically. Controlling for this, no negative relation between immigrant supply and immigrant wages remains. More generally, the findings highlight problems in structural estimation of wage effects of immigration, and also the need to distinguish between effects of immigrants of different origins.