Do Immigrants Affect Firm-Specific Wages?

In this paper, we propose and test a novel effect of immigration on the wages of nativeworkers. Existing studies have focused on the wage effects that result from changes in theaggregate labour supply in a competitive labour market. We argue that if labour markets arenot fully competitive, the use of immigrants may also affect wage formation at the mostdisaggregate level – the workplace. Using linked employer-employee data, we find that anincreased use of workers from less developed countries has a significantly negative effect onthe wages of native workers at the workplace - also when controlling for potentialendogeneity of the immigrant share using both fixed effects and IV. Additional evidencesuggests that this effect works at least partly through a general effect on the wage norm inthe firm of hiring employees with poor outside options (the immigrants)...br