In this paper we analyze the long-run impact of immigration on employment, productivity, and its skill bias. We use the existence of immigrant communities across U.S. states before 1960 and the distance from the Mexican border as instruments for immigration flows. We find no evidence that immigrants crowded out employment. At the same time, we find that immigration had a strong, positive association with total factor productivity and a negative association with the high skill bias of production technologies. The results are consistent with the idea that immigrants promoted efficient task specialization, thus increasing TFP, and also promoted the adoption of unskilled-efficient technologies.

Positive assortative matching increases both the wages of more productive workers and wage dispersion. We study the effect of immigration on positive assortative matching using French employer-employee data from 1995 to 2005. We find that increases in the share of immigrants, driven by historical networks across local labor markets, generated stronger positive assortative matching between workers and firms. We present evidence suggesting that this effect was associated to higher wages for more productive workers and that the findings are consistent with increased workers' screening by firms.

We estimate the aggregate long-run elasticity of substitution between more educated workers and less educated workers (the slope of the inverse demand curve for more relative to less educated workers) at the U.S. state level. Our data come from the (five) 1950–1990 decennial censuses. Our empirical approach allows for state and time fixed effects and relies on time- and state-dependent child labor and compulsory school attendance laws as instruments for (endogenous) changes in the relative supply of more educated workers. We find the aggregate long-run elasticity of substitution between more and less educated workers to be around 1.5.