The Effects of Immigration on the Economy: Lessons from the 1920s Border Closure

NBER Working Paper No. 26536.

Ran Abramitzky, Philipp Ager, Leah Platt Boustan, Elior Cohen, Casper W. Hansen

NBER Working Paper No. 26536
Issued in December 2019
NBER Program(s):Development Economics Program, Labor Studies Program

 

In the 1920s, the United States substantially reduced immigrant entry by imposing country-specific quotas. We compare local labor markets with more or less exposure to the national quotas due to differences in initial immigrant settlement. A puzzle emerges: the earnings of existing US-born workers declined after the border closure, despite the loss of immigrant labor supply. We find that more skilled US-born workers – along with unrestricted immigrants from Mexico and Canada – moved into affected urban areas, completely replacing European immigrants. By contrast, the loss of immigrant workers encouraged farmers to shift toward capital-intensive agriculture and discouraged entry from unrestricted workers.