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DOES EMPLOYING UNDOCUMENTED WORKERS GIVE FIRMS A COMPETITIVE ADVANTAGE?

Authors


  • The research in this paper was undertaken while J. David Brown was a visiting scholar at the Federal Reserve Bank of Atlanta. The views expressed in this paper are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Valuable research assistance was provided by Nicole Baerg, Katharyn Rees, Navnita Sarma, and Menbere Shiferaw. The authors also benefited from consultations with Clark Burdick and Russell Hudson from the Social Security Administration and from discussions with participants at seminars at the Federal Reserve Bank of Atlanta, Oberlin College, and Heriot-Watt University. Additional helpful comments and suggestions were also received from Atanas Christev, Jacques Melitz, Giovanni Peri, and Mark Schaffer. We would also like to thank the editors and referees for their insightful and productive comments; all remaining errors are the responsibility of the authors. The appendices referenced throughout the paper can be found online at: http://www.frbatlanta.org/pubs/wp/12_02.cfm.

Abstract

ABSTRACT Using administrative data from the state of Georgia, this paper finds that, on average, across all firms, employing undocumented workers reduces a firm's hazard of exit by 19 percent. The advantage to firms from employing undocumented workers increases as more firms in the industry do so, decreases with the skill level of the firm's workers, increases with the breadth of a firm's market, and increases with the labor intensity of the firm's production process.

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