How low-skilled immigration is changing US prices and labor markets : three essays

This dissertation consists of three essays on the effects of low-skilled immigration on US prices and labor markets. The first essay uses confidential data from the Consumer Price Index to estimate the causal effect of low-skilled immigration on the prices of non-traded goods. Then, it combines wage and price effects with consumption patterns of native skill groups to determine the net benefits and distributional impacts of immigration on the native economy. The results suggest that a 10 percent increase in the share of low-skilled immigrants in the labor force decreases the price of immigrant-intensive services by 1.3 percent. I also find that wage effects are significantly larger for low-skilled immigrants than for low-skilled natives because the two are imperfect substitutes. Overall, the results imply that the low-skilled immigration wave of the 1990s increased the purchasing power of high-skilled natives by 0.65 percent but decreased the purchasing power of low-skilled natives by 2.66 percent. The second essay, coauthored with Jose Tessada, is motivated by the first essay's finding that low-skilled immigration reduces the prices of services such as housekeeping and babysitting. Because these services are close substitutes for home production, a decrease in their price should affect natives' time use.