Immigration

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Immigration

• It almost seems that nobody can hate America as
  much as native Americans. America needs new
  immigrants to love and cherish it. Eric Hoffer

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Questions that one needs to answer

• What are the predicted labor market consequences
  of immigration? To what extend does evidence
  support the theory?
• Why do people migrate? Numerous explanations.
• To what extent do migrants (and their
  children/grandchildren) assimilate?
• Any other interesting consequences of immigration
  (e.g. fiscal deficit/growth)?
• Migration consequences for the sending countries
  (e.g. brain drain, etc.)?

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Legal Immigration to the United States by Decade,
1820-2000
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US migrant flows, US census bureau
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A simple model of the impact of migration on the
labor market

• Economy with 2 types of people (Sskilled
  Uunskilled) 3 markets for skilled workers, for
  unskilled workers and for goods and services
  produced by these two inputs
• Y is the output of goods and services, Ds is the
  amount of Y demanded by skilled workers (as a
  function of the price p and how much they earn)
  and Du is the amount of Y demanded by unskilled
  workers.

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A simple model of the impact of migration on the
labor market

• Let Ls and Lu be the relative labor supplies of
  the two groups of people. Making (for the time
  being!) the simplifying assumption of perfectly
  inelastic labor supply, we get

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A simple model of the impact of migration on the
labor market

• The production function is
• Solving the profit maximizing problem of the
  firm

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A simple model of the impact of migration on the
labor market

• What does this model predict vis-à-vis the wage
  and employment of skilled and unskilled workers?
• What happens if immigration increases the labor
  supply of both skilled and unskilled workers in
  the same proportions?
• What happens if it increases only the labor
  supply of unskilled workers?
• What are the consequences for consumers, skilled
  and unskilled natives?

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Questions to ask in general

• How does migration change the skill composition
  in a region/country?
• How does demand for goods and services change and
  can this have an offsetting effect on the demand
  for workers who are substitutes of the migrants?
• Are there any secondary effects, e.g. natives
  moving to other regions?

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Example one migration and the US skill
distribution
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Example two the US-Canada comparison
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Empirical evidence spatial correlations (e.g.
Card, 2005)

• Equations estimated (by location!)

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Estimates of the impact of migrants on earnings
inequality spatial correlations
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Potential problems with spatial correlations
endogeneity

• Instrumentation doesnt change the results
  dramatically (see Card, 2005 Friedberg and Hunt,
  1995)
• Another solution natural experiments

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The Mariel Boatlift (see Card, 1990)
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Potential problems with spatial correlations the
natives response to migration
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Some evidence on the natives response to
migration
Source Borjas, 2008
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Solutions nation-wide estimates of the impact of
migration on relative wages

• Examples Borjas et al (1997) Borjas (2003).

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Other aspects of the impact of migration on the
local economy
Prior to immigration, there are N native workers
in the economy and national income is given by
the trapezoid ABN0. Immigration increases the
labor supply to M workers and national income is
given by the trapezoid ACM0. Immigrants are paid
a total of FCMN dollars as salary. The
immigration surplus gives the increase in
national income that accrues to natives and is
given by the area in the triangle BCF.
The immigrant surplus
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Estimates of the immigrant surplus, Borjas, 1995
21
But then we should ask the question of who is
likely to migrate and why

• A overview paper is Massey et al (1993)
  Theories of international migration. A review
  and appraisal, Population and development
  review, 431-466.

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The neoclassical Macro view Lewis, 1954 Ranis
and Fei, 1961 Harris and Todaro, 1970
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The neoclassical Micro view Sjaastad, 1962
Todaro, 1969, 1976 Todaro and Maruszko, 1989)
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The neoclassical Micro view Sjaastad, 1962
Todaro, 1969, 1976 Todaro and Maruszko, 1989)
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The new economics of migration Stark and
Bloom, 1985 Stark and Lahiri, 1988 Katz and
Stark, 1986 Stark, 1991.
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The new economics of migration Stark and
Bloom, 1985 Stark and Lahiri, 1988 Katz and
Stark, 1986 Stark, 1991.
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The new economics of migration Stark and
Bloom, 1985 Stark and Lahiri, 1988 Katz and
Stark, 1986 Stark, 1991.
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Market dualism, Piore (1979)
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World systems theory Wallenstein, 1974 Portes
and Walton, 1981 Petras, 1981 Castells, 1989,
Sassen, 1988 Moraska, 1990
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World systems theory Wallenstein, 1974 Portes
and Walton, 1981 Petras, 1981 Castells, 1989,
Sassen, 1988 Moraska, 1990
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Perpetuation of international movement network
theory Hugo, 1981 Taylor, 1986 Massey, 1990
Gurak and Caces, 1992
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How do migrants adjust to the local market?
Age-earnings profiles in a cross-section
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Cohort Effects and the Immigrant Age-Earnings
Profile
The cross-sectional age-earnings profile
erroneously suggests that immigrant earnings grow
faster than those of natives.
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The Wage Differential between Immigrant and
Native Men at Time of Entry
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Evolution of Wages for Specific Immigrant Cohorts
over the Life Cycle
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Evidence on migrant assimilation United States
Source Card (2005)
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Evidence on migrant assimilation United States
(Card, 2005)
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Evidence on migrant assimilation, Canada