Does Employing Undocumented Workers Give Firms a Competitive Advantage?

J. David Brown, Julie L. Hotchkiss, and Myriam Quispe-Agnoli
Working Paper 2012-2a
Revised November 2012

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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.

JEL classification: J15, C41, J42

Key words: Firm survival, illegal immigrants, hazard rates, survival analysis

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. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility. This paper is forthcoming in Journal of Regional Science.

Please address questions regarding content to J. David Brown, School of Management and Languages, Heriot-Watt University, Edinburgh EH14 4AS, United Kingdom, 44 131 451 3493,; Julie Hotchkiss, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309, 404-498-8198,; or Myriam Quispe-Agnoli, Community and Economic Development Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309, 404-498-8930,

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