Immigration and Economic Growth in Prince Edward Island

1

• Immigration and Economic Growth in Prince Edward
  Island
• By
• Wimal Rankaduwa
• University of Prince Edward Island
• Economics and Labour Market Integration (ELMI)
  Domain
• Atlantic Metropolis Centre
• ELMI Domain Annual Symposium 2009

2
PURPOSE

• To undertake an empirical examination into the
  relationship between immigration inflow and
  economic growth in the provincial economy of
  Prince Edward Island (PEI).
• To formulate an econometric model of economic
  growth within the framework of an aggregate
  production function and estimate it with PEI data
  for the period from 1981 to 2005.
• The model relates economic growth rate to the
  private investment output ratio and the growth
  rates of labour, immigration inflow, government
  investment and exports.
• Motivated mainly by two Previous Studies
• 1. Rankaduwa (2004)- Productivity in Prince
  Edward Island Economy An Empirical Assessment
• 2. Akbari, Lynch, McDonald, and Rankaduwa (2007)
  Socioeconomic and Demographic Profiles of
  Immigrants
• in Prince Edward Island

3
PEIs Economic Development Challenge

• Rankaduwa (2004) reviewed the relationship
  between standard of living and productivity in
  Prince Edward Island, relative to Canada and the
  United States.
• There has been a persistent standard of living
  gap in PEI
• about 33 relative to Canada, and 43 relative to
  United States.
• Productivity gaps have been the largest
  contributor to the standard of living gap in PEI.
• per worker productivity gap is above 25.
  Relative to US the gap is about 37. PEI per
  worker productivity ranks the lowest among the
  Canadian provinces and the US states.
• per hour productivity gap relative to Canada is
  about 28.
• Closing the standard of living gap (i.e.,
  improving productivity and promoting economic
  growth) is the main development challenge facing
  PEI, at present

4
Can Immigration Help Improve Productivity and
Promote Growth?

• Average labour productivity depends on
• Skills - Human capital
• Tools - Physical capital
• Resources- Land and other natural resources
• Technology
• Home grown RD
• Imported via patents, licenses imitation
• Entrepreneurship, management organization
• Political and legal environment
• Immigrant Inflows can provide resources enhancing
  productivity in various forms, directly or
  indirectly skilled labour, human capital,
  capital inflow, technology transfer, managerial
  and entrepreneurial capabilities etc.

5
PEIs Immigration Experience

• Akbari, Lynch, McDonald, and Rankaduwa (2007)
  Some findings
• Prince Edward Islands share of annual
  immigration into Canada was less than one-tenth
  of one percentage except for few years
• The proportion of PEIs immigrant population fell
  steadily
• Immigrants contribution to population growth
  increased over time
• At time of their arrival, immigrants were younger
  than the resident non-immigrant population, and
  this age difference has widened over time.

6
Akbari, Lynch, McDonald, and Rankaduwa (2007)
Some findings Continued

• Composition of Immigrants
• Family class immigrants comprise the largest
  category of immigrants, accounting for 57 in
  2005, refugees 24 and skilled immigrants 19.
•  
• Proportion of skilled immigrants decreased from
  1981 to 2005. Annual average share of skilled
  immigrants decreased from 28 in the 1981-85
  period to 17 in the 2001-05 period.
• Average annual share of business immigrants was
  only about 3 of total principal applicants
  during the 2001-2005 period. This number was
  about 10 percent for the 1980s and 13 percent for
  the 1990s

7
Akbari, Lynch, McDonald, and Rankaduwa (2007)
Some findings Continued

• Human Capital
• Education level of immigrants to PEI compared
  favourably with that of non-immigrants over the
  1981-2001 period.
• At 2001 census, about 48 of non-immigrants in
  PEI had acquired high school or less education,
  compared with 42 of immigrants to PEI who
  arrived in the 1996-2001 period.
• Percentage of immigrants with a degree who had
  recently arrived in PEI increased from 18 in
  1986 to 29 in 2001.
• Proportion of new immigrants with a university
  degree further increased to 42 in 2006, while
  the proportion of immigrants with high school or
  less education further decreased to 30 in 2006.

8
Akbari, Lynch, McDonald, and Rankaduwa (2007)
Some findings Continued.

• Labour Market Outcomes
• immigrants are less likely to be unemployed,
  have higher labour incomes on average, and
  receive slightly higher amounts of government
  transfers on average.
• Recent immigrants are more likely to be in the
  labour force, be unemployed, and have lower
  earned incomes on average. This may be partly due
  to a lack of recognition of educational
  credentials.
• It is likely that immigrants contribution to the
  PEI economy is not being fully realized.

9
Akbari, Lynch, McDonald, and Rankaduwa (2007)
Some findings Continued.

• Skilled Immigrants
• The inflow of medium- and low-skilled immigrants
  has shown a declining trend since 1989.
• Since the late 1980s, the inflow of highly
  skilled immigrants also has displayed a declining
  trend but has been completely reversed since 2003
  
• Between 2001 and 2005
• proportion of highly skilled immigrant workers
  increased from 52 to 72
• proportion of low-skilled immigrant workers
  decreased from 10 to 8

10
(No Transcript)
11
(No Transcript)
12
Does Immigration Promote Economic Growth?

• Model of Economic Growth
• dY/Y a0 a1dK/Y a2 dL/L a3 dH/H a4dG/G
  a5dX/X U
• Where,
• dY/Y Economic Growth Rate
• dK/Y Investment Output Ratio
• dL/L Growth rate of Labour
• dH/H Growth rate of immigrant inflow
• dG/G Growth rate of Government Investment
• dX/X Growth rate of Exports
• U Error term

13
Does Immigration Promote Economic Growth?
Continued.
14
Does Immigration Promote Economic Growth?
-Continued
15
Does Immigration Promote Economic Growth?
Continued
16
Does Immigration Promote Economic Growth?
Continued
17
Does Immigration Promote Economic Growth?
Continued
18
Conclusions

• Growth rate of Immigration inflows is a
  significant determinant of economic growth rate
  in PEI
• Immigrant inflow promotes economic growth in
  PEI. Marginal product of immigrants has increased
  over time
• Private investment output ratio, and the
  growth rates of labour, government investment and
  exports are also significant determinants of
  economic growth rate.
• Past Immigration Inflows contribute to economic
  growth through their impact on the growth of
  private investment, labour, government investment
  and exports.
• Potential contribution of immigrant inflows to
  overall economic growth seems to have not been
  realized
• A comprehensive economic growth strategy in
  which immigration plays a critical role is
  necessary to realize full growth potential.