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Immigration - PowerPoint PPT Presentation

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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

Fraction foreign born

Fraction Foreign-Born

Fraction foreign born continued

Fraction Foreign-Born continued



  • 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

The immigration surplus

The Immigration Surplus

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

The immigration surplus heterogeneous labour

The Immigration Surplus- Heterogeneous Labour

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

Effect on earnings

Effect on Earnings

Effect on unemployment rate

Effect on Unemployment Rate

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

Typical borjas result

Typical Borjas Result

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

Rising immigration into the uk

Rising Immigration into the UK

Manacorda manning wadsworth conclusions

Manacorda, Manning, WadsworthConclusions

Implications for effect on wages

Implications for Effect on Wages

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.

Card evidence ej 2005

Card evidence – EJ 2005

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

European social survey data

European Social Survey Data

And some more

And some more…

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