Comparing the Domestic Labor Market Impacts of a South-North and South-South Migration: The Cases of Costa Rica and the United States

Federico Castillo, University of California, Berkeley
J. Keith Gilless, University of California, Berkeley
Steven Raphael, University of California, Berkeley

In this paper, we calibrate a structural model of the native wage distribution to the economies of two countries: Costa Rica and the United States. We then use these empirical models to simulate the likely effects of labor market competition with immigrants on native wages. For Costa Rica we find very little evidence of imperfect substitutability between immigrants and natives of similar observable human capital levels. In contrast, there is fairly strong evidence of imperfect substitutability between immigrants and natives in the U.S. A plausible interpretation of this finding is that the ability to speak the receiving nation’s language is an important determinant of the degree of substitutability between otherwise similar immigrants and natives. The wage simulation results yield little evidence of an impact of immigration on native wages in Costa Rica, and suggest modest effects on the least skilled natives in the U.S