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Immigration. General Questions. The type of questions that economists have been interested in are: what is the impact of immigration on the receiving/sending country ? how does the impact vary across groups? What determines attitudes to immigration?

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general questions
General Questions
  • The type of questions that economists have been interested in are:
    • what is the impact of immigration on the receiving/sending country ?
    • how does the impact vary across groups?
    • What determines attitudes to immigration?
    • What should public policy on immigration be?
  • More interest in it currently because of rise of immigration in many OECD countries
  • Perhaps not what you expected
  • Reason is probably fast growth in immigrant share in some countries
  • Note that skill mix varies from country to country so hard to generalise.
models of impact of immigration
Models of Impact of Immigration
  • Simplest model – homogeneous labour, immigration raises supply of labour in the economy – Y=F(K,N)
  • Basic idea is immigration surplus – natives gain from immigration
  • Size is small
  • Probably even smaller in LR with CRS
  • Distributional effects may be more important – workers lose, capitalists gain
heterogeneous labour
Heterogeneous Labour
  • Skilled and unskilled labour
  • Can write production function as
  • Wages will be:
  • Wages only depend on relative supplies
  • Implies immigration only affects natives if alters skill mix
  • Will always be gains to natives if immigration affects skill mix
  • Largest if immigrants very different
other issues
Other Issues
  • external effects
  • taxes and the welfare state – this affects net benefits of immigrants – even such an ardent free marketer as Milton Friedman says that “You cannot simultaneously have free immigration and a welfare state”
  • social consequences of immigration – perhaps these are more important than the economic effects.
  • Assimilation – immigrants often start at the bottom of the pile but many groups then rise up.
  • Does immigration ‘grease the wheels’ of the labour market?
empirical evidence of impact of immigration
Empirical evidence of impact of immigration
  • The ‘experiment’ one would like to do is to drop some immigrants at random into certain labour markets and then observe the outcomes.
  • That is difficult if not impossible to do - though some studies have tried to use the dispersal policies applied to asylum-seekers by some countries.
common empirical specification
Common Empirical Specification
  • A typical regression using non-experimental data would try to run a regression of the form:
  • where I is some measure of the impact of immigrants on the local market (e.g. the share of immigrants).
  • Problems:
    • Endogeneity of immigrant flow
    • Responses of natives
    • What is the right level of aggregation
card ilrr 1990 mariel boatlift
Card, ILRR 1990Mariel Boatlift
  • April 20 1980 – Castro allows Cubans to leave for the US
  • Between May and September 125000 did
  • Most went to Miami:
    • 7% increase in labour force
    • 20% increase in number of Cubans in Miami
  • Clear exogenous shock to the Miami labour force
  • Compares labour market performance before and after with comparison cities
card s conclusions
Card’s Conclusions
  • virtually no effect on the wage or unemployment rates of less-skilled non-Cubans.
  • How is this possible?
    • off-setting flows of other immigrants or natives not very important
    • industrial structure made it relatively easy to absorb large numbers of low-skilled immigrants.
  • Other studies have used a similar methodology studying those who returned to Portugal after the end of its colonies, to France after Algerian independence and to Israel following the collapse of the Soviet Union.
  • The pattern found by Card seems fairly common.
borjas qje 2003
Borjas, QJE 2003
  • Argued that cities are not distinct labour markets:
    • Labour mobility between them
    • Trade between them
  • Divides US labour market as a whole into segments by age and education – similar to Card-Lemiuex
  • Looks to see whether education-age cells with big changes in immigrant shares are correlated with wage changes of natives
borjas conclusions
Borjas Conclusions
  • Borjas concludes immigrants do depress wages of natives with whom they compete
  • But treats immigrants and natives as perfect substitutes within age-education cells
  • This is relaxed by Ottaviano and Peri – they find natives and immigrants are imperfect substitutes
implications of ottaviano peri
Implications of Ottaviano-Peri
  • Effect of new immigrants is primarily on wages of existing immigrants
  • Effect on wages of natives does exist but is small and positive
  • Conclusion is controversial
manacorda manning wadsworth
Manacorda, Manning, Wadsworth
  • UK study
  • Other UK studies found little impact of immigration on wages of natives
  • Puzzle to reconcile this with Card-Lemieux who find that relative supplies do matter
  • Estimated Card-Lemieux model but with third level in which immigrants and natives are imperfect substitutes
the final word
The Final Word?
  • Perhaps not really
  • Card quite critical of Borjas results
  • Borjas has 3 education groups – college, HS, drop-out (Card-Lemiuex had 2)
  • Card argues it is important to distinguish between college/high school and high school/drop-put.
  • Card argues the former wage ratio is sensitive to relative supplies but the latter is not
  • It is the latter that, in the US in recent years, has been most affected by immigration.
what s the big deal about immigration
What’s the big deal about immigration?
  • Economists routinely fail to find large effects of immigration on natives
  • The effects they do find are often positive
  • Perhaps this misses the point because people get very upset about immigration
a recent nber working paper immigration wages and compositional amenities card dustmann and preston
A Recent NBER Working PaperImmigration, Wages, and Compositional Amenities Card, Dustmann and Preston
  • Economic theory says effects of immigration like effects of trade
  • But people much more hostile to immigration than free trade
  • Perhaps because immigration also alters communities as well as economies
  • These effects seem at least as important