In this paper, we reconcile the disparity between regional and national level estimates of the effect of immigration on native earnings. This reconciliation derives from the fact that existing national level studies fail to adequately account for changes in other determinants of the wage structure that correspond closely with the skill distribution of immigrant shocks. We focus specifically on the effect of accounting for incarceration trends. Over the past thirty years, an increasing

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... of low-skilled native workers have served time in prison, a development that has arguably harmed the employment prospects of low-skilled native workers. We show that the fraction of a given education-experience group that is immigrant is strongly correlated with the fraction of native born workers in the demographic group that are currently institutionalized. Holding constant incarceration trends considerably diminishes the estimated magnitude of the reduced-form relationship between native labor market outcomes and the fraction in their skill-cell that is immigrant. We also incorporate incarceration trends into a structural model of native wages. Our key innovation is to empirically model the productivity coefficients of a national production function as a time-varying function of the factor's overall incarceration rate. We find that omitting incarceration trends from the structural model causes an under-estimation of the substitution elasticities between similarly educated workers of different experience levels as well as between workers from different education groups. This greater degree of factor substitutability combined with the assumption of an infinitely-elastic supply of capital yields quite small structural estimates of the effects of recent immigration trends on native wages.