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Working Paper No. 09-02

Do Firms Respond to Immigration?
originally submitted as Does Immigration Substitute for Offshoring?
William W. Olney
March 2009; revised August and November 2009


Research generally focuses on how immigration affects native workers, while the impact of immigration on domestic firms is often overlooked. This paper addresses this important omission by examining whether firms respond to immigration by adjusting the location of their production activities. Consistent with the predictions of the model, the results indicate that low-skilled immigration decreases and high-skilled immigration increases the relocation of production activities at both the extensive and intensive margins. These results explain why the impact of immigration on the wages of native workers is often found to be quite small.

JEL classification: F16, F22, L2
Keywords: immigration, fi…rm structure, establishment births & deaths, offshoring