Andrei Levchenko (UMich): The Economic Impact of Mass Deportations
Authors: Javier Cravino, Andrei A. Levchenko, Francesc Ortega and Nitya Pandalai-Nayar
Abstract: This paper quantifies the effects of large-scale deportations on wages, prices, and real in comes in the United States. We impute the legal status for each worker in the American Community Survey by combining detailed individual information with group-level visa records. In 2024, 3.2% of US workers were unauthorized, but some regions and sectors were heavily dependent on unauthorized immigrant labor. We develop a dynamic quantitative framework with multiple regions, sectors and occupations, heterogeneous workers, and endogenous capital accumulation to study the economic impacts of removing unauthorized workers. We derive analytical expressions relating region- and occupation specific real wages and sectoral relative prices to changes in the supply of immigrant workers, observable factor shares, and combinations of structural elasticities. Following the removal of 50% of unauthorized immigrants, in the short run average native real wages rise 0.15% nationally, driven by an increase in the capital-labor ratio. In the long run, however, native real wages fall in every state, and by 0.33% nationally, as capital gets decumulated in response to a lower population. At the same time native wages in the most immigrant intensive occupations rise by up to 3.4% nationwide in the long run. Consumer prices in the sectors intensive in unauthorized workers– such as Farming– rise by about 1% relative to the price of the average consumption basket, while most other sectors experience negligible relative price changes.
Economics
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