An examination of the effect of immigration on income inequality: A Gini index approach

This paper examines the impact of immigration on income inequality. Using data from 1990 and 2000 US Censuses, we link the changes in income inequality as measured by the Gini index with immigrant flows into each metropolitan area in the U.S. We address endogeneity of immigrant inflows by relying on variation in historical distribution of earlier immigrants from each source country. The results suggest that using the Gini index as a measure of income inequality results in immigration having stronger effects on inequality than the findings of other studies based on changes in skill-related wage premiums. Interestingly, low-skilled immigration as proxied by Mexican immigration is found to have little effect on income inequality. However, the estimates are subject to a downward bias if native workers respond to an increase in low-skilled immigration by moving away from the affected locations.