Labor Mobility

1
Labor Mobility
2
International Migration and the Roy Model

• Who migrates to the United States?
• Would we expect immigrants from other countries
  to be more or less skilled than workers in the
  United States?
  
• The Roy Model attempts to address these
  questions.
  
• One underlying idea high levels of income
  inequality correspond to high returns to skill.

3
Migration from Countries with Low Income
Inequality

• Consider workers residing in countries where the
  returns to human capital are
  
• For example, countries with relatively
  egalitarian income distributions such as Sweden.
  
• Relative to the US,
• This generates incentives for the skilled to
  migrate to the U.S. because they have the most to
  gain by moving.

4
Migration from Countries with High Income
Inequality

• Consider workers residing countries where the
  returns to human capital are
  
• For example, countries such as Mexico that have
  substantial income inequality.
  
• Relative to the US,
• This generates incentives for the unskilled to
  migrate to the U.S. because they have the most to
  gain by moving.

5
The Distribution of Skills in the Country of
Origin
6
The Roy Model

• Earnings opportunities of a worker with skills s

Returns to skill higher in the U.S.
Returns to skill higher in the origin country
7
Positive and Negative Selection

• PANEL A positive selection.
• PANEL B negative selection.

8
Implications

• Immigrants from countries with egalitarian income
  distribution (like Sweden) are positively
  selected.
  
• Immigrants from countries with high levels of
  inequality (like Mexico) are negatively
  selected.
  
• Despite the fact that these prediction conform to
  our stereotypes about immigrants, there is
  considerable evidence that immigrants from most
  countries are positively selected.

9
Migration Costs
No one should migrate from the US to Sweden, and
everyone from Sweden should migrate from Sweden
to the US. But this picture assumes that migrat
ion costs are zero.
Dollars
US
US
aus
Sweden
as
aus-C
Skills
Sp
10
Immigrant Performance in the U.S. Labor Market

• How do immigrants perform in the U.S.?
• Are immigrants more or less skilled than
  U.S.-born workers?
  
• How do immigrants perform over the course of
  their working life in the U.S?

11
Cross-Sectional Studies of Age-Earnings Profiles
of Immigrants

• Suppose you have data from 1990.
• How do you calculate the age-earnings profile of
  immigrants?
  
• One possibility
• Calculate mean earnings in 1990 for

You can then graph this
12
Cross-Sectional Studies of Age-Earnings Profiles
of Immigrants
Basic patterns
13
Cohort Effects
Recall This graph was constructed using
earnings data from a single year.
The individuals who give you the data point for
20 year olds are not the same as the individuals
who give you the data point for 65 year olds.
14
Cohort Effects, Continued
Year in which immigrants arrive
Estimated Age-Earnings Profile
Dollars

1950 Wave
True Age-Earnings Profiles
1970 Wave

1990 Wave

Age
20
40
60
Age at which immigrants arrive
15
Cohort Effects, Continued

• Previous slide assumes that more recent cohorts
  are less skilled than older cohorts.
  
• What is the evidence on this?

16
Age-Earnings Profiles, Allowing for Cohort Effects

• The basic idea is to control for cohort effects
  by tracking individuals using data from many
  years.

17
Assessing the Impact of Immigration on the US
EconomyThe Winners

• Immigrants.
• Consumers of outputs.
• Cheap labor causes the MC of production to fall
  so the long-run price will also fall.
  
• Inputs that are gross complements with immigrant
  labor.
  
• If the price of labor drops, then the demand for
  gross complements will rise.
  
• Immigration also increases the gross domestic
  product.

18
Assessing the Impact of Immigration on the US
EconomyThe Losers

• Inputs that are gross substitutes for immigrant
  labor.
  
• If the price of labor falls, then the demand for
  gross substitutes will fall.
  
• Evidence from the Mariel boatlift suggests that
  immigration does not have a large negative impact
  on the employment of US-born workers.
  
• Tax Payers could frustrate antipoverty efforts
  if immigrants have few labor market
  opportunities.
  

19
Sample Problem

• Suppose that a workers skills can be summarized
  by the number of efficiency units she owns. The
  distribution of efficiency units is such that
  worker 1 has 1 efficiency unit, worker 2 has 2
  efficiency units, and so on.
• Suppose that there are 100 workers in Country A.
  In deciding whether or not to migrate to the
  U.S., citizens of Country A compare their weekly
  earnings at home (wA) with their potential
  earnings in the United States (wus). The wage
  skill relationship in the two countries is given
  by
• where s gives the number of efficiency units
  that the worker has.

20
Sample Problem, Continued

• Assume that there are no migration costs. What
  proportion of the population in Country A
  immigrates to the US? What is the average number
  of efficiency units among the immigrants? Is the
  immigrant flow positively or negatively
  selected?

w
USA Slope1
Country A Slope0.5
700
670
s
60
21
Sample Problem, Continued

• Suppose that workers who migrate from Country A
  to the United States must pay a migration cost
  equivalent to 10 in weekly wages. What
  proportion of the population in Country A
  immigrates to the US? What is the average number
  of efficiency units among the immigrants? Is the
  immigrant flow positively or negatively selected?

w
USA Slope1
Country A Slope0.5
700
670
660
s
80