Immigrants-Natives complementarities in production: evidence from Italy

Agnese Romiti
Tor Vergata University, Italy

This paper studies the impact of immigration on the Italian labor market using administrative data on Italian private-sector non-agricultural employees during the period 1990-2004. The analysis adopts a structural model based on a four level CES production function extending the model in Card(2001) in order to allow imperfect substitution both between immigrants and natives within the same area-skill cell, and between females and males within the same area-skill-nativity status cell. The endogeneity of labor supply is controlled for by using past immigrants' settlement as in Card(2001). In detecting the impact of immigrants on natives' wages the paper deals with the potential offsetting role of natives' outmigration by comparing estimates obtained with local areas defined at regional levels and then aggregated into 5 macroareas. The results provide evidence of a small but detectable degree of imperfect substitution between immigrants and natives, whereas female and male workers turn out to be perfect substitutes with estimates robust to both definition of geographic variability. Immigrants seem not to have any effect on natives' employment. The simulation based on the estimated parameters suggests that a skill specific immigrants'inflow reduces mainly same skill immigrants' wages (-5\%), and to a lesser extent different skill immigrants' wages (-1\%), whereas natives' wages are unaffected.

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