Examining the U.S. Labor Market Performance of Immigrant Workers in the Presence of Network Effects

Networks are thought to have an important impact on individuals’ access to labor markets. Yet, it is a challenging task to identify network effects because the functioning of networks relies heavily on unobservables that may be correlated with other productivity-related characteristics. In this study, we quantify the importance of networks as a determinant of workers’ labor market outcomes. Using variation in the distance to the nearest Mexican rail lines in the past as a source of identification, we find that the size of the network is positively related to current wages and to the probability of being a documented immigrant.