Immigration and the Tower of Babel: Using language barriers to identify individual labor market effects of immigration

This paper introduces a novel approach to estimating immigration impacts on natives’ labor market outcomes. Differential language requirements across occupations serve as an arguably exogenous source of variation during the large and sudden immigration surge to Norway after the enlargements of the European labor market in 2004 and 2007. Migrant inflow into occupations is instrumented with occupations’ required level of (Norwegian) language skills. Administrative register data allow for a rich set of individual-level outcomes. Comparing workers in occupations with different language requirements, I find that a one percentage point increase in the share of Eastern European workers reduced native workers’ labor earnings by 0.75 percent. I further find adverse employment effects and evidence of skill-upgrading, but largely no other form of worker mobility among treated individuals. In particular, young woŕkers were hit in the wage dimension and old workers in the employment dimension. The results are highly robust.