Global Tides, Local Currents: Navigating Labor Market Assimilation of Second-Generation Immigrants

In this study, we illustrated how localized disturbances, such as import competition from China, can intricately influence the assimilation process in the labor market of SGI. Specifically, we assess the variation in performance on the employment margin, a consistent measure of performance in the context of local labor market shocks. This analysis is conducted by adapting the empirical framework of ADH to the assimilation context and by developing a proxy to identify the SGI despite some data constraints. The primary findings indicate that second-generation immigrants are disproportionately impacted by the shock in the manufacturing sector, which is directly affected by Chinese competition. In contrast, no evidence suggests sufficient spillover effects in the non-manufacturing sector offset this heightened sensitivity. To understand the causes of the estimated impact on employment we decomposed it and identified as the main channel the difference in the causal impact. That is, ceteris paribus the population size in a labor market and the employment allocation through industries, the main driver for differential results is that the SGI seems to be more sensible to the China shock. This justifies delving into the analysis of human capital differences to explain employment differences. Analyzing differences in the distribution of educational attainment, we show that the incomplete convergence to the results of natives gives a plausible source for the higher sensitivity to the shock. Indeed, the presence of a gap is not observed when comparing the relative performances of subgroups at the same educational level. Also, the findings support the existing evidence that greater mobility among foreign individuals can partially facilitate the subgroup's adjustment to the trade shock, resulting in comparatively better outcomes compared to the SGI. Finally, to enrich our understanding of the human capital mechanism we studied the interaction with the supply of specific skills by employing data from the O*Net dataset. By examining the overall employment response across different skill dimensions, it becomes apparent that diverse reactions depend on the skill level. This suggests a labor reallocation process that stems from the China Shock toward specific tasks. Additionally, the heterogeneous reallocation of employment aligns with the comparative advantage pattern observed among natives in the existing literature. Consequently, this presents an alternative viewpoint on the previously identified disparities in employment outcomes. Upon examining the data at the subgroup-specific level, it is discovered that within the labor force comprising individuals with similar skills, the SGI do not exhibit any signs of underperformance. On the contrary, they may even experience advantages as a result of the native employment transitioning to different occupations, with the SGI substituting them.