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Immigrants' Labor Supply and Exchange Rate Volatility

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  • Arash Nekoei

Abstract

Are an immigrant's decisions affected in real time by her home country's economy? I examine this question by exploiting exchange rate variations as exogenous price shocks to immigrants' budget constraints. I find that in response to a 10 percent dollar appreciation, an immigrant decreases her earnings by 0.92 percent, mainly by reducing hours worked. The exchange rate effect is greater for recent immigrants, married immigrants with absent spouses, Mexicans close to the border, and immigrants from countries with higher remittance flows. A neoclassical interpretation of these findings suggests that the income effect exceeds the cross-substitution effect. Remittance targets offer an alternative explanation.

Suggested Citation

  • Arash Nekoei, 2013. "Immigrants' Labor Supply and Exchange Rate Volatility," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 144-164, October.
    • Handle: RePEc:aea:aejapp:v:5:y:2013:i:4:p:144-64
    Note: DOI: 10.1257/app.5.4.144
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    References listed on IDEAS

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    Cited by:

    1. Christian Dustmann & Hyejin Ku & Tetyana Surovtseva, 2024. "Real Exchange Rates and the Earnings of Immigrants," The Economic Journal, Royal Economic Society, vol. 134(657), pages 271-294.
    2. Akhtar, Sharmin & Masih, Mansur, 2018. "Does asymmetry matter in the relationship between exchange rate and remittance? Evidence from a remittance recipient country based on ARDL and NARDL," MPRA Paper 91764, University Library of Munich, Germany.
    3. Joan Monras, 2020. "Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis," Journal of Political Economy, University of Chicago Press, vol. 128(8), pages 3017-3089.
    4. Alpaslan Akay & Olivier Bargain & Klaus F. Zimmermann, 2017. "Home Sweet Home?: Macroeconomic Conditions in Home Countries and the Well-Being of Migrants," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 351-373.
    5. Nguyen, Ha & Duncan, Alan, 2015. "Macroeconomic fluctuations in home countries and immigrants’ well-being: New evidence from Down Under," MPRA Paper 69593, University Library of Munich, Germany, revised Feb 2016.
    6. Nguyen, Ha Trong & Duncan, Alan S, 2017. "Exchange rate fluctuations and immigrants' labour market outcomes: New evidence from Australian household panel data," Journal of International Economics, Elsevier, vol. 105(C), pages 174-186.
    7. Akay, Alpaslan & Brausmann, Alexandra & Djajic, Slobodan & Kirdar, Murat Güray, 2018. "Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants," IZA Discussion Papers 11679, Institute of Labor Economics (IZA).
    8. Akay, Alpaslan & Brausmann, Alexandra & Djajić, Slobodan & Kırdar, Murat G., 2021. "Purchasing-power-parity and the saving behavior of temporary migrants," European Economic Review, Elsevier, vol. 134(C).
    9. Emmanuel Apergis & Nicholas Apergis, 2022. "Reverse Immigration Effects for Expatriates in Oman During the COVID-19 Pandemic Shock," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 28(1), pages 19-37, May.
    10. Ward, Zachary, 2017. "Birds of passage: Return migration, self-selection and immigration quotas," Explorations in Economic History, Elsevier, vol. 64(C), pages 37-52.
    11. Christoph Albert & Joan Monras, 2022. "Immigration and Spatial Equilibrium: The Role of Expenditures in the Country of Origin," American Economic Review, American Economic Association, vol. 112(11), pages 3763-3802, November.
    12. Abarcar, Paolo, 2017. "The return motivations of legal permanent migrants: Evidence from exchange rate shocks and immigrants in Australia," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 62-77.
    13. Ha Trong Nguyen & Luke Brian Connelly, 2018. "Out of sight but not out of mind: Home countries' macroeconomic volatilities and immigrants' mental health," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 189-208, January.
    14. Piera Bello, 2017. "Exchange rate fluctuations and border crossings: evidence from the Swiss-Italian border," IdEP Economic Papers 1701, USI Università della Svizzera italiana.
    15. Merton, Robert C, 1978. "On the Cost of Deposit Insurance When There Are Surveillance Costs," The Journal of Business, University of Chicago Press, vol. 51(3), pages 439-452, July.
    16. Borjas, George J. & Cassidy, Hugh, 2020. "The Adverse Effect of the COVID-19 Labor Market Shock on Immigrant Employment," IZA Discussion Papers 13277, Institute of Labor Economics (IZA).
    17. Jacopo Bassetto & Teresa Freitas Monteiro, 2024. "Immigrants’ Returns Intentions and Job Search Behavior When the Home Country Is Unsafe," CESifo Working Paper Series 10908, CESifo.
    18. Apergis, Nicholas & Cooray, Arusha, 2018. "Asymmetric real exchange rates and poverty: The role of remittances," Emerging Markets Review, Elsevier, vol. 35(C), pages 111-119.
    19. Nekoei, Arash, 2022. "The measurement of labor supply using March CPS: A cautionary tale," Economics Letters, Elsevier, vol. 216(C).

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    More about this item

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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    1. Immigrants' Labor Supply and Exchange Rate Volatility (American Economic Journal: Applied Economics 2013) in ReplicationWiki

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