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Labor Market Competition and the Assimilation of Immigrants

Christoph Albert, Albrecht Glitz, Joan Llull

American Economic Review · 2026 · Volume 116 · Issue 5

DOI: 10.1257/aer.20220865

Abstract

This paper shows that the wage assimilation of immigrants is the result of the intricate interplay between individual skill accumulation and dynamic labor market equilibrium effects. When immigrants and natives are imperfect substitutes, rising immigrant inflows widen the wage gap between them. Using a production function framework in which workers supply both general and host-country-specific skills, we show that this labor market competition channel explains about one-fifth of the large increase in the average immigrant–native wage gap across arrival cohorts in the United States since the 1960s. The results further reveal substantial heterogeneity across different groups of immigrants.

Keywords

Time Allocation and Labor Supply, Labor Demand, Human Capital, Skills, Occupational Choice, Labor Productivity, Wage Level and Structure, Wage Differentials, Geographic Labor Mobility, Immigrant Workers, Immigration Law, Technological Change: Choices and Consequences, Diffusion Processes

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