The Contribution of Immigration to Local Labor Market Adjustment

The US suffers from persistent regional disparities in employment rates. In principle, these disparities should be eliminated by population mobility. Can immigration fulfill this role? Remarkably, since 1960, I show that new migrants from abroad account for 40% of the average population response to these disparities - which vastly exceeds their historic share of gross migratory flows. But despite this, immigration does not significantly accelerate local population adjustment (or reduce local employment rate disparities), as it crowds out the contribution from internal mobility. Indeed, this crowd-out can help account for the concurrent decline in internal mobility. Finally, I attribute the “excess” foreign contribution to a local snowballing effect, driven by persistent local shocks and the dynamics of migrant enclaves. This mechanism raises challenges to the (pervasive) application of migrant enclaves as an instrument for foreign inflows. But rather than abandoning the instrument, I offer an empirical strategy (motivated by my model) to overcome these challenges; and I demonstrate its efficacy.