The dynamic impact of immigration on natives' labor market outcomes: Evidence from Israel

Sarit Cohen-Goldner, M. Daniele Paserman

Research output: Contribution to journalArticlepeer-review

55 Scopus citations


This paper studies the short and medium run impact of highly skilled immigrants from the Former Soviet Union to Israel on natives' wages and employment. If immigrants are relatively good substitutes for native workers, the impact of immigration will be largest immediately upon the immigrants' arrival, and may become smaller as the labor market adjusts to the supply shock. Conversely, if immigrants upon arrival are poor substitutes for natives, the initial effect of immigration is small, and increases over time as immigrants acquire local labor market skills and compete with native workers. We empirically examine these alternative hypotheses using data from Israel between 1989 and 1999.We find that wages of both men and women are negatively correlated with the fraction of immigrants with little local experience in a labor market segment. A 10 percent increase in the share of immigrants lowers natives' wages in the short run by 1-3 percent, but this effect dissolves after 4-7 years. This result is robust to a variety of different segmentations of the labor market, to the inclusion of cohort effects, and to different dynamic structures in the residual term of the wage equation. On the other hand, we do not find any effect of immigration on employment, neither in the short nor in the medium run.

Original languageEnglish
Pages (from-to)1027-1045
Number of pages19
JournalEuropean Economic Review
Issue number8
StatePublished - Dec 2011

Bibliographical note

Funding Information:
We are very thankful to Rachel Friedberg for gracefully sharing her data. We also thank Jennifer Hunt, Magnus Lofstrom, Saul Lach and seminar participants at the European University Institute, Bar-Ilan University, Ben Gurion University, the University of Haifa, Tel Aviv University, Uppsala University and at the IZA Annual Migration Meeting in Bonn (June 2004) for helpful comments. We acknowledge generous financial support from the Maurice Falk Institute for Economic Research in Israel. Stas Krasinski and Royi Ben-Ivri provided excellent research assistance. All errors are our own.


  • Employment
  • Immigration
  • Labor demand
  • Wages


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