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The Economic Contribution of Unauthorized Workers: An Industry Analysis

Author

Listed:
  • Edwards, Ryan

    (University of California, Berkeley)

  • Ortega, Francesc

    (Queens College, CUNY)

Abstract
This paper provides a quantitative assessment of the economic contribution of unauthorized workers to the U.S. economy, and the potential gains from legalization. We employ a theoretical framework that allows for multiple industries and a heterogeneous workforce in terms of skills and productivity. Capital and labor are the inputs in production and the different types of labor are combined in a multi-nest CES framework that builds on Borjas (2003) and Ottaviano and Peri (2012). The model is calibrated using data on the characteristics of the workforce, including an indicator for imputed unauthorized status (Center for Migration Studies, 2014), and industry output from the Bureau of Economic Analysis. Our results show that the economic contribution of unauthorized workers to the U.S. economy is substantial, at approximately 3% of private-sector GDP annually, which amounts to close to $5 trillion over a 10-year period. These effects on production are smaller than the share of unauthorized workers in employment, which is close to 5%. The reason is that unauthorized workers are less skilled and appear to be less productive, on average, than natives and legal immigrants with the same observable skills. We also find that legalization of unauthorized workers would increase their contribution to 3.6% of private-sector GDP. The source of these gains stems from the productivity increase arising from the expanded labor market opportunities for these workers which, in turn, would lead to an increase in capital investment by employers.

Suggested Citation

  • Edwards, Ryan & Ortega, Francesc, 2016. "The Economic Contribution of Unauthorized Workers: An Industry Analysis," IZA Discussion Papers 10366, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10366
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christoph Albert, 2021. "The Labor Market Impact of Immigration: Job Creation versus Job Competition," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 35-78, January.
    2. Ortega, Francesc & Hsin, Amy, 2018. "Occupational Barriers and the Labor Market Penalty from Lack of Legal Status," IZA Discussion Papers 11680, Institute of Labor Economics (IZA).
    3. Giuntella, Osea & Lonsky, Jakub, 2020. "The effects of DACA on health insurance, access to care, and health outcomes," Journal of Health Economics, Elsevier, vol. 72(C).
    4. Michael A Clemens, 2022. "The economic and fiscal effects on the United States from reduced numbers of refugees and asylum seekers," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 38(3), pages 449-486.
    5. Giuntella, Osea & Lonsky, Jakub & Mazzonna, Fabrizio & Stella, Luca, 2021. "Immigration policy and immigrants’ sleep. Evidence from DACA," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 1-12.
    6. Olivieri, Sergio & Ortega, Francesc & Rivadeneira, Ana & Carranza, Eliana, 2020. "Shoring up Economic Refugees: Venezuelan Migrants in the Ecuadorian Labor Market," IZA Discussion Papers 13502, Institute of Labor Economics (IZA).
    7. Ortega, Francesc & Hsin, Amy, 2022. "Occupational barriers and the productivity penalty from lack of legal status," Labour Economics, Elsevier, vol. 76(C).
    8. Ortega Francesc & Edwards Ryan & Hsin Amy, 2018. "The Economic Effects of Providing Legal Status to DREAMers," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-18, June.
    9. Baldoni, Edoardo & Coderoni, Silvia & Esposti, Roberto, 2018. "Immigrant workforce and labour productivity in Italian agriculture: a farm-level analysis," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 6(3), May.
    10. Christoph Albert, 2017. "The Labor Market Impact of Undocumented Immigrants: Job Creation vs. Job Competition," CESifo Working Paper Series 6575, CESifo.

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    More about this item

    Keywords

    industry; unauthorized; immigration; contribution;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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