Immigration, Wages, and Employment under Informal Labor Markets

This paper studies the labor market impacts of Venezuelan immigrants in Colombia. Exploitingspatial variation in exposure, I nd a negative e ect on native wages driven by the informalsector (where immigrants are concentrated) and a reduction in native employment in the formalsector (where the minimum wage binds for many workers). To explain this asymmetry, I builda model in which rms substitute formal for informal labor in response to lower informal wages.Consistent with the model's predictions, I document that the increase in informality is drivenby small rms that use both labor types in production.

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