Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download International Migration
Document related concepts
Transcript
International Migration*
Noel Gaston
Bond University
&
Douglas R. Nelson
Tulane University
Abstract
This paper surveys current theoretical and empirical research on international migration with a
particular emphasis on the links between trade theory and labor empirics.
JEL Classification: F2
*
This paper was prepared for the Handbook of International Trade edited by Daniel Bernhofen, Rod Falvey and
David Greenaway. The published version was dramatically shortened, resulting in the excision of most of the
technical content as well as most of the references.
International Migration
Like immigration itself, economic research on migration seems to come in waves. The large
scale of current global migration, and the sometimes quite ugly politics associated with that
migration, has produced just such a wave of research. Theoretical and empirical research on
immigration, in particular, occurs across the social sciences, with particularly large bodies in
economics, demography/sociology, and political science.1 Within Economics, the study of
immigration falls between trade and labor economics, with sizable bodies of both theoretical and
econometric work. To limit the field of coverage, and differentiate this survey from others in the
field, we will focus on a set of questions framed by standard trade theoretic models and the
empirical research that bears on those questions.
We begin our analysis with two sorts of background: section 1 provides a brief overview of data
on the scale and distribution of global migration; while section 2 provides a brief overview of the
main theoretical models that will be used in this chapter. The substantive core of the chapter is
the analysis of a set of questions that treat migration as a straightforward case of international
factor arbitrage. We consider two broad types of question: those that are essentially international
questions; and those that are essentially domestic questions. With respect to the first type, we
consider the effect of migration on comparative advantage and trade patterns, and whether
immigration and trade are complements or substitutes. Turning to essentially national questions,
we will focus on aggregate level effects on production structure and labor markets. All of these
topics treat immigration as straightforward factor arbitrage. That is, nothing essential would be
lost by switching the theoretical analysis from labor to capital migration. We next turn to two
issues in which the analysis really is about labor in an essential way: the role of networks, illegal
immigration, and welfare states. We finish with a discussion of recent work on the political
economy of immigration.
1. Some Basic Data on International Migration
Migration is not a recent phenomenon: people have always migrated in search of food, shelter
and fortune (e.g., the gold rushes in California, Victoria, etc.).2 They have left the mother country
for the colonies; have fled their countries during war-time, times of persecution, famine and
political chaos. Historically, much migration was involuntary: African slaves who were
1
The academic literature on immigration is so large, and so well served by surveys, that one could easily write a
survey of the surveys. Most closely related to the approach taken here, there have been several surveys from a trade
theoretic perspective. Of particular note are: Ruffin (1984); Ethier (1986c; 1996); Razin and Sadka(1994); Venables
(1999); and Schiff (1999). Also of note is Wong‘s (1995) textbook on international trade that seeks to incorporate
factor mobility as an essential element throughout the text—chapters 4 (on factor mobility in general) and 14 (on
immigration) are particularly relevant. These all focus virtually exclusively on the theory, in this chapter we seek to
incorporate coverage of relevant empirical work.
2
See Carter and Sutch (1998), Hatton and Williamson (2006), and Sassen (1999).
~1~
transported to the United States, convicts transported to Australian penal colonies and bonded
labour was transported to East Africa and other places. Most modern day migration is voluntary
and is driven by the search for a better life.
A notable development in the last century was the steady rise of national policies to control
immigration – legal and illegal. As Sassen (1999) points out, the development of democracy,
nationalism and welfare states have made immigration a politically more difficult, and
potentially more explosive, issue in contemporary times compared to earlier times. The policies
to affect the levels and patterns of international migration are now quite widespread (see United
Nations, 2009a). In developed countries, policies are motivated by issues such as low fertility
and demographic ageing, unemployment or skilled worker shortages, brain-drain and brain-gain,
social integration and national security. Xenophobia is ever-present as well (Freeman, 1993).
According to UNPOP (2009a), in 2010 the number of international migrants in the world will
reach almost 214 million, which represents 3.1 per cent of the world population. In the two
decades between 1990 and 2010, the world will have 59 million more international migrants (see
table 1).
Table 1. Estimated Number of International Migrants, 1990-2010
Number of
international
migrants (millions)
Percentage of
total population
Percentage
distribution of
international
migrants
Development group and major area
1990
2010
1990
2010
1990
2010
World
More developed regions
Less developed regions
Africa
Asia
Latin America and the Caribbean
Northern America
Europe
Oceania
154.8
82.4
72.5
16.4
49.8
7.0
27.6
49.4
4.8
213.9
127.7
86.2
19.3
61.3
7.5
50.0
69.8
6.0
2.9
7.2
1.8
2.5
1.6
1.6
9.8
6.9
16.2
3.1
10.3
1.5
1.9
1.5
1.3
14.2
9.5
16.8
100.0
53.2
46.8
10.6
32.2
4.5
17.8
31.9
3.1
100.0
59.7
40.3
9.0
28.7
3.5
23.4
32.6
2.8
Source: United Nations, Department of Economic and Social Affairs, Population Division. Trends in the
International Migration Stock: The 2008 Revision.
Notes: 2010 figures are estimates. More developed regions comprise all regions of Europe plus Northern
America, Australia/New Zealand and Japan. Less developed regions are Africa, Asia (excluding Japan),
Latin America, the Caribbean, plus Melanesia, Micronesia and Polynesia. International migrant stock: Midyear estimate of the number of people living in a country or area other than that in which they were born. If
the number of foreign-born was not available, the estimate is the number of people living in a country other
than that of their citizenship.
While three per cent seems a trifling amount, there are considerable differences across regions
and individual countries. Developed countries have absorbed about three-quarters of the increase
in the number of international migrants in the past two decades. The major increases in the
number of international migrants occurred in Northern America (22.4 million) and Europe (20.4
million). The proportion of migrants in the total population between 1990 and 2010 increased in
~2~
all the more developed regions and declined in the less developed regions. Lowell (2007) notes
that these trends actually extend back to at least 1975.
In 2010, the countries with at least 20 million inhabitants, where international migrants will
constitute more than 20 per cent of the population, are Australia, Canada and Saudi Arabia (table
2). Countries with increases in the last two decades of international migrants of greater than 60
per cent include Canada, Germany, the United Kingdom and the United States. The most
dramatic change has been experienced by Spain, where the number of international migrants
grew by a remarkable 686 per cent. According to UNPOP (2009b), a relatively small number of
countries host the majority of the world‘s international migrants. The United States accepts by
far the largest number of international migrants.
Table 2: International Migration, by country
Total
(millions)
Percentage
of total
population
Total
(millions)
2010
Country
Percentage
of total
population
1990
Saudi Arabia
7.3
27.8
4.7
29.2
Australia
4.7
21.9
3.6
21.0
Canada
7.2
21.3
4.5
16.2
Spain
6.4
14.1
0.8
2.1
United States of America
42.8
13.5
23.3
9.1
Germany
10.8
13.1
5.9
7.5
Ukraine
5.3
11.6
6.9
13.4
Côte d'Ivoire
2.4
11.2
1.8
14.4
France
6.7
10.7
5.9
7.5
United Kingdom
6.5
10.4
3.7
6.5
Source: United Nations, Department of Economic and Social Affairs, Population Division.
International Migration, 2009 Wallchart.
Notes: Countries with populations greater than 20 million and migrant stock proportions
greater than 10 per cent in 2010.
During most of the 1990s, while there was no significant increase in legal immigration flows,
illegal migration increased steadily. On one hand, these facts point to the effectiveness of
policies aimed at restricting immigration (Hanson, 2009). On the other hand, the difficulty in
controlling illegal flows has elevated immigration to an important place on the political stage in
many developed countries. The ―problem‖ is not just felt in the southern border states of the
United States. More than 9 million former Soviet citizens migrated following the collapse of
communism. After the fall of the Berlin Wall, Germany absorbed 4 million immigrants, of whom
2 million were ethnic Germans from the former Soviet Union (Dietz, 2000).
Migration and population policies are driven by different considerations in source, transit and
eventual host countries. However, for the purposes of this survey, the migration policies have
changed most notably in many developed countries: from an almost open policy (for whites, at
least) to much more targeted programs favouring migrants with higher levels of education, skills
~3~
and human capital. In reality, this policy shift may be illusory. Hatton and Williamson (2006)
suggest that any changes in the number of ―high quality‖ immigrants, relative to ―low quality‖
immigrants, has much to do with the countries and regions from which the new residents are
emigrating. According to Borjas (1999b), all migration policies address two questions: ‗how
many immigrants should the country allow in‘ and ‗who should those immigrants be?‘ Australia
and Canada have a ‗points system‘ for the admission of new residents with a desirable set of
characteristics.3
Table 3 shows that more than two-thirds of the immigrants in OECD countries come from the
low-income regions of the world. While this does suggest that the gains from migration are
greatest for those with relatively low incomes, this also suggests that, on average, people migrate
from regions with low levels of human capital and labour productivity to regions with labour
markets with higher average levels of human capital and labour productivity.4 Lowell (2007)
shows that there was a net increase of just less than 7.5 million non-tertiary-educated migrants
from less developed and into more developed nations during the 1990s (an increase of 64%). In
fact, in the year 2000 almost 96 per cent of all adult migrants with less than a tertiary education
settled in Northern America, Europe or Oceania.5
3
In Australia, for example, since the mid-1990s there has been a significant shift toward skilled migrants (and away
from migrants entering under the family migration program). This has been justified in the context of alleviating
skill shortages in the Australian labour market. Politically, it was also seen as necessary to ‗restore public
confidence‘ in the Australia‘s Migration Program, see Khoo (2002).
Notwithstanding, it‘s also the case that the migrants from the low income areas tend to have higher skills compared
to those people who don‘t migrate. This feature is called ‗positive selection‘. The fact that the more able migrate
relates to their lower costs of migration and the greater likelihood of success in their destination countries. This
aspect of selection bias has its origins in A. D. Roy‘s (1951) seminal work.
4
5
The fact that most migrants flow to a relatively small number of wealthy OECD countries, is in stark contrast to
the effects of liberalised trade which are not so geographically concentrated.
~4~
Table 3: Share of OECD Immigrants
by Sending Region, 2000
Low Income Sending Region
Mex., Cen. Am., Caribe
South & Southeast Asia
Eastern Europe
Africa
Middle East
South America
Pacific Islands
Total
0.202
0.154
0.128
0.080
0.063
0.041
0.004
0.672
High Income Sending Region
Western Europe
Asia, Oceania
North America
Total
0.244
0.055
0.029
0.328
Notes: High Income North America includes Canada
and the U.S. and High Income Asia and Oceania
includes Australia, Hong Kong, Japan, Korea, New
Zealand, Singapore and Taiwan.
Source: Adapted from Hanson (2008), table 2.
More skilled workers usually find legal entry into a new country easier (and less costly) than
their unskilled counterparts do. Temporary workers have become increasingly important in
Western European countries. For example, Germany recently granted 1,000 new temporary visas
for computer programmers and those with ―scarce‖ IT skills. Such workers are thought to
enhance labour market flexibility (particularly, when immigration restrictions are in place) and to
help meet temporary sectoral shortfalls of particular types of labour. As with the large numbers
of ―temporary‖ Turkish workers who sought to remain in Germany, there are some potentially
thorny political issues that may need to be confronted in the future (see Zimmermann, 1995).
However, the most heated debates are undoubtedly concerned with the immigration of unskilled
labour, particularly from developing countries, and the impact on labour market performance.
Of course, as is well-known, the 1980s and 1990s were associated with growing wage and income
inequality in many wealthy countries. Table 4 shows two different income inequality statistics – the Gini
coefficient and the 90-10 income ratio - for the developed countries listed in table 2. The data are from the
Luxembourg Income Study (LIS). The latest data are indicated and differenced from the LIS waves
closest to 1990 and 1980. Income inequality has increased in all listed countries, with the exception of
France. Once again, with the exception of France, the change in inequality since 1980 has been quite large
in all the countries. These facts seem to suggest a link between immigration and inequality. Kahanec and
Zimmermann (2009) argue that drawing such a link may be misleading due to the fact that the
‗New World‘ countries with a high share of foreign-born population, such as the United States or
Australia, also have higher income inequality. Post-transition OECD countries tend to very low shares of
foreign population and low Gini coefficients. Western European countries are in between the two
extremes. However, they do find that for Northern and Western European countries, which share similar
~5~
histories of immigration and economic institutions, that there is a distinct negative relationship between
the Gini coefficient and the share of foreigners in the labour force.
Table 4: Change in Household Income Inequality, selected countries
LIS Dataset(s)
Australia 2003 - wave VI
Canada 2004 - wave VI
France 2000 - wave V
Germany 2000 - wave V
Spain 2000 - wave V
United Kingdom 2004 - wave VI
United States 2004 - wave VI
Gini
Coefficient
0.312
0.318
0.278
0.275
0.336
0.345
0.372
Change
since 1990
0.008
0.037
-0.009
0.018
0.033
0.009
0.034
Change
Percentile
Change
since 1980 Ratio (90/10) since 1990
0.031
0.034
-0.010
0.031
0.018
0.075
0.071
4.241
4.379
3.447
3.366
4.686
4.460
5.683
Change
since 1980
0.053
0.602
-0.014
0.376
0.727
-0.208
0.032
0.313
0.329
0.050
0.481
0.318
0.930
1.014
Source: Luxembourg Income Study (LIS) Key Figures, http://www.lisproject.org/keyfigures.htm.
While immigration is generally thought to have had a relatively minor impact on national wage
levels, there may however, be unwanted effects on the wages of certain occupations or skill
groups. As with trade liberalization, these distributional issues are very prominent in the debate
about the desirability of immigration.
2. The Basic General Equilibrium Framework: Factor mobility and Factor Returns
For most trade economists, the 2-factor × 2-good model of general competitive equilibrium, with
the full set of Heckscher-Ohlin-Samuelson (HOS) assumptions, is the first stop for developing
intuition on real (as opposed to monetary) international questions. By contrast, most labor
economists start with some version of the many-factor × 1-good model of general equilibrium.
In this section, we begin by reviewing the basic comparative statics from the HOS model,
following which we will examine a variety of models closely related to the models in common
use in labor economics. With those results in hand, we will present a general many factor, many
final good model of general equilibrium that embeds both of these standard approaches. 6 We
start with background assumptions and notation.
In common with most applied general equilibrium modeling, we consider a framework with
some number of factors of production (# = m, indexed by i I), some number of final
commodities (# = n, indexed by j J), and some number of households (# = H, indexed by h
H).7 Households are endowed with the economy‘s factors of production and preferences defined
It should be clear that even this ―general‖ model is considerably more special than even the abstract general
equilibrium model of the Arrow-Debreu-McKenzie (ADM) sort. While the ADM model is a perfectly competitive
model, that abstracts from increasing returns to scale, imperfect and incomplete markets, etc., it is well known that it
is too general to yield comparative statics of the sort we are interested in this chapter.
7
We will not be doing much with the dimensionality of households, so little is lost with using the label of the set of
households to denote the cardinality of the set.
6
~6~
over final commodities;8 and firms are endowed with a constant return to scale technology, f j(zj),
that transforms factors of production into final commodities and cost minimization as an
objective.9 Factors of production are assumed to be costlessly mobile between firms within a
sector and between sectors; and commodities are assumed to be costlessly mobile between firms
and households. The exchanges of factors and commodities between firms and households are
assumed to be mediated by a complete set of perfectly competitive markets.10
Given our technological assumptions, cost minimization by firms allows us to represent the
technology of the sector with a cost function c j(w), where w is a vector of factor prices.
Differentiating the cost function with respect to the elements of w yields a vector of input-output
c j w
coefficients
cij w aij w , where the aij need to be understood as (homogeneous of
wi
degree zero) functions of the wage vector. We can represent the technology of the economy as
the m × n matrix A(w) = [aij] whose columns are the vectors representing the technologies of the
n sectors. Following the approach made popular by Jones (1965, pp. 96-97), and detailed on
Silberberg and Suen (2001, Chapter 19), letting z the m dimensional vector of factor
endowments, y denote the n-dimensional vector of outputs, and p the n-dimensional vector of
commodity prices, we can represent equilibrium in the economy with the full-employment and
zero profit conditions:11
Ay z
Aw p
(1)
Immigration, minimally, involves mobility of some factors between countries. To consider a
world of international migration, we must also have at least two countries. As Markusen (1983)
notes, in a world made up of countries of the sort we have just described that is also
characterized by identical factor endowments, identical technologies and identical homothetic
preferences, even if trade and factor mobility are costless, there will be no basis for trade in
goods or factors. Thus, to get the analysis going, whether we are interested in the effects of
migration on a single, given country, or on the equilibrium of a trading world, we will need to
assume some form of heterogeneity in countries and/or market imperfections such that
international exchange is possible. Most research on immigration begins by abstracting from
both preference heterogeneity and technology heterogeneity to focus on endowment
8
Preferences are taken to be rational (complete and transitive) as well as well-behaved (continuous, monotone,
strictly convex). In addition, it will often be convenient to assume that all households share identical preferences
with additional properties that make for ease of aggregation—homotheticity or quasi-linearity.
9
We will consider non constant return to scale technologies later, and then profit maximization will be an
appropriate objective function for the firm.
10
All institutional assumptions necessary to ensure existence and competitiveness of all markets are implicitly
assumed.
11
We assume that every factor is used in the production of at least two commodities and production of every
commodity requires at least two factors. The framework used here, and much of the analysis of the general case, is
taken directly from the appendix to Jones and Scheinkman (1977).
~7~
heterogeneity. Work on migration, per se, often also abstracts from trade by assuming either the
given country is an economically small free trader or is completely closed to trade in
commodities. The first strategy has the advantage of fixing the prices facing the economy, while
the second treats factor mobility as the only international linkage. In all three of the specific
versions of the general m × n model, immigration is simply a transfer of (some kinds of) foreign
factors of production from one country to another. When discussing migration, these factors will
be called labor; but in these models there is nothing particularly to distinguish different sorts of
labor from one another, or to distinguish labor as a class from other types of factors of
production. Later in this chapter we ask what sorts of issues are distinctive to international
movement of labor qua human beings. As we shall see, there are two main comparative static
questions to be asked in these models: the effect of a change in the endowment of labor on
prices; and the effect of a change in the endowment of labor on outputs.
2.1. Factor Mobility in the 2-factor × 2-good, Heckscher-Ohlin-Samuelson (HOS) Model
We begin with 2-factor × 2-good HOS model. As with equations (1), letting a bar denote a fixed
endowment, we can characterize the equilibrium in terms of the full employment and zero profit
conditions.12
a11 y1 a12 y2 z1
a21 y1 a22 y2 z2
a11w1 a21w2 p1
(2)
a12 w1 a22 w2 p2
Note that in the even case (i.e. m = n) these conditions are separable. That is, in this case, we can
solve for equilibrium factor prices using only the zero profit conditions. This means that, as long
as both goods continue to be produced, the endowments do not enter into determination of
relative factor prices. In addition to the general assumptions laid out above, we now assume that,
both (all) countries have access to the same technological opportunities for producing both
goods; and that, for all relative prices that involve both final goods being produced in a given
national economy, the factor-intensity ranking of the two industries does not change—i.e. no
factor-intensity reversals (―no FIRs‖).
[Figure 1 about here]
A convenient representation of this model is the Lerner (1952) diagram. Without loss of
generality, it is convenient to associate factor 1 with commodity 1, such that for all prices
supporting the production of both goods:
a11 a12
.
a21 a22
12
The classic development of the HOS model is Jones (1965).
~8~
(3)
The Lerner diagram involves projection of unit value isoquants into factor input space.13 The
slope of the unit isocost line tangent to the unit value isoquants gives the equilibrium factor price
ratio. If we measure allocation of factor 1 on the horizontal axis and allocation of factor 2 on the
vertical axis, the assumption of no FIRs means that the expansion paths (rays from the origin by
CRS) reflecting equilibrium relative input combinations for any given relative factor prices for
sector 2 will always lie above those for sector 1. The expansion paths associated with given
equilibrium prices describe a cone in input space such that any endowment that lies in the cone
permits diversified production consistent with full employment and zero profits at the given
prices. As a result, this cone is called the cone of diversification. Starting from endowment point
z z1 , z2 , using the properties of vector addition, it is easy to identify the equilibrium
allocation of the two factors between the two sectors. Now suppose that the immigration quota
for factor 2 is increased such that the new endowment is z z1 , z2 . As long as z remains in
the cone of diversification, we can identify the new allocation of factors among sectors.
This involves no change in relative commodity prices or factor prices. This is easy to see in the
Lerner diagram. With unchanged commodity prices, the unit value isoquants remain fixed in
place, and tangent to the unit value isocost, whose slope gives the relative w2/w1 ratio. The
expansion paths that intersect these points of tangency define the cone of diversification
associated with the equilibrium. Leamer (1995) calls this property of the HOS model the factorprice insensitivity theorem. It is the one country version of the more well-known, and more
controversial, factor-price equalization theorem. We will discuss factor-price insensitivity in
more detail when we consider the general m × n model. At this point, we simply note that
instead of adjustment in relative factor prices, adjustment to the immigration shock occurs on the
output margin, with sector 2 (the factor 2 intensive sector) expanding and sector 1 contracting.
This adjustment on the output margin is also an essential element of the Rybczynski theorem: at
constant relative commodity prices, and under the full set of HOS assumptions, an increase in the
endowment of one factor, holding the other endowment constant, will cause an increase in the
output of the commodity whose production uses that factor intensively, proportionally greater in
magnitude than the change in endowment; and a decrease in the output of the other commodity
(Rybczynski, 1955). Note the essential role played by the assumption that commodity prices are
unchanged. 14 Given the structure of the HOS model, factor-price insensitivity holds, so with
unchanged commodity prices, as long as the endowment change remains in the cone of
diversification, factor prices will be unchanged and, thus, endowment changes will be a weighted
average of output changes (Jones, 1965). Thus, in figure 1, it is easy to see that the increase in
13
The unit value isoquant for a commodity gives all combinations of factor 1 and 2 capable of producing that
quantity of the commodity that sells for $1. That is, it is the 1/pj isoquant.
14
Interestingly, Rybczynski was ultimately interested in the effect of an endowment change on the terms of trade
(the title, after all, is ―Factor Endowment and Relative Commodity Prices‖). What we call the Rybczynski theorem
is more like a lemma on the way to a conclusion about terms-of-trade.
~9~
the immigration quota for factor 2 zˆ2 0, where a ‗hat‘ denotes a proportional change) results
in a decrease in the output of commodity 1 and an increase in the output of commodity 2.
Furthermore, given the weighted average property, we must have:15
yˆ 2 zˆ2 zˆ1 ( 0) yˆ1.
(4)
Factor price insensitivity needs to be qualified in at least two ways. First, if the country is large,
so that a change in its pattern of production changes the world relative prices, then standard
Stolper-Samuelson effects will apply. Continuing the example of the previous paragraph: the
increase in relative supply of commodity 2 induced by the flow of factor 2 will cause the world
relative price of commodity 2 to fall; via the Stolper-Samuelson theorem, this produces a fall in
the real return of factor 2, and a rise in the real return to factor 1. In figure 2, taking commodity
1 as the numeraire, the fall in the price of commodity 2 will show up as an outward shift in the
commodity 2 unit value isoquant (i.e. $1 buys a larger quantity of commodity 2). The new $1
isocost line tangent to the original commodity one and the new commodity 2 unit value
isoquants, whose slope is equal to r2/r1, is flatter, reflecting the fall in the relative return to factor
2. The second qualification refers to an endowment change sufficiently large as to move the
endowment point outside the cone of diversification. Without changing the dimensionality of the
model (i.e. retaining 2 goods), there is now only one good produced, so the economy now
behaves like a 2-factor × 1-good economy, and we have a downward sloping factor 2 demand
curve. If the overall economy is characterized by 2 factors and m goods, the overall factor 2
demand curve will be characterized by downward sloping portions, where only one final good is
produced; and ―flats‖, where two goods are produced.
2.2. Factor Mobility in the m-factor × 1-good model
The m × 1 model is the most common framework applied by labor economists working on
estimating the effects of immigration, as well as the basis of the two-country model widely used
for discussion of international equilibrium of migration. For this model, the commodity is
interpreted as gross domestic product, a function of a list of factor inputs: y = f(z), z = (z1,…,zm).
Consider, without loss of generality, the 2 factor × 1-good (easily graphable) case. As with the
HOS case, we can use the standard representation of the equilibrium in terms of the zero profit
and full employment conditions as:
15
Totally differentiating the full employment conditions in (2), and denoting the share of factor i used in sector j by
λij i.e. ij aij y j / zi , it is straightforward to derive zˆi
jJ
ij
yˆ j ij aˆij . However, with unchanged
jJ
relative factor prices, the aˆij are all zero, so endowment changes must be λij-weighted averages of output changes.
Thus, with y1 falling, the proportional change in y2 must exceed the proportional change in z2.
~ 10 ~
a11 y1 z1
a21 y1 z2
(5)
a11w1 a21w2 p1
It should be clear that the single zero profit condition cannot be used to determine the factor
returns without using the full-employment conditions. In fact, the relative endowments will
determine the relative factor prices, while the full employment condition determines the absolute
value of prices.16 The logic of this claim is easily understood by considering the unit isoquant
for production of GDP—shown in Figure 2a. The ray from the origin through the endowment
point cuts the unit isoquant, picking out the aij‘s. Thus, in this model, endowments play a role in
determining equilibrium factor prices. 17 If we suppose that the country is small, so that the price
of the single good is fixed, we can differentiate the production function with respect to the
internationally mobile factor, for fixed quantities of the other factors, at every level of allocation
of the internationally mobile factor, yielding the economy-wide demand for that factor—i.e. the
value marginal product curve. This curve is portrayed for factor 2 in Figure 2b.
[Figure 2a and b about here]
The area under the curve, from the origin to the endowment of the internationally mobile factor,
gives total product (i.e. GDP). The intersection of the vertical supply curve with the demand
curve identifies the return to the internationally mobile factor, identifying total payment to the
internationally mobile factor as the rectangular area. Because the area under the curve is GDP, if
we subtract the payment to the internationally mobile factor from GDP, the remainder is the
payment to the other factors. Thus, we have identified the distribution of income in the
economy. This is most transparent in the two factor case. If the country now permits an increase
in the stock of the mobile factor, say by increasing the immigration quota, it is easy to see that all
units of the mobile factor previously resident in the country experience a reduction their return,
while all units of the internationally immobile factor experience an increase in their return.
Generalizing this result to the case of multiple immobile factors requires that all immobile
factors be substitutes for the internationally mobile factor.18
It is straightforward to show that an increase in price of the country‘s good will have no effect on output, but will
raise the return to each of the factors in the same proportion as the increase in price. See Woodland (1982, pp. 9697).
17
The analysis above applies here, but factor-price insensitivity would be an unusual case. The (degenerate) cone is
the ray through the initial endowment point and any change in endowment that falls on this line will satisfy factorprice insensitivity, but any other pattern of change will result in a change in relative factor prices. As we shall see,
when m > n a change in the endowment will generally produce a change in relative wages.
16
18
Most empirical studies find quite complicated relations between immigrant labor and other national factors. This
fact will have important implications for conclusions about the distributional effects of immigration.
~ 11 ~
In addition to these distribution effects, the triangular area is called the ―immigration surplus‖
and represents the gain to home factors from immigration. Note from the analysis of distribution
effects that this gain is completely captured by the internationally immobile factor.
The static analysis of the effect of immigration on output is trivial: with marginal product of
labor positive, but diminishing with fixed quantities of other factors, national output rises, but by
less than the increase in the endowment of labor.
[Figure 3 about here]
If we now consider a world made up of two m × 1 countries, we have what Ruffin (1984) calls
the MacDougall-Kemp model.19 This has a simple graphical representation in which the
horizontal axis gives the world endowment of the internationally mobile factor and the labor
demand curves are projected from vertical axes at the limits of the horizontal axis. In a world
characterized by free mobility of the internationally mobile factor, the intersection of the two
labor demand curves identifies the allocation of the internationally mobile factor between the
two countries, and the distribution of income can be identified as in the single country case. We
will return to this later, but it is probably useful to note here that figure 3 makes clear the gain to
labor from the sending country, and the loss to specific capital from that country.
2.3. Factor Mobility in 3-factor × 2-good models
A very closely related model is the 3-factor × 2-good, specific factors (aka Ricardo-Viner) model
(Jones, 1971; Samuelson, 1971). In this case, each commodity is produced using one
intersectorally mobile factor and one sector specific factor. In this case we have two zero profit
conditions and 3 full employment conditions. Letting factor 1 be specific to sector 1, factor 2 be
specific to sector 2, and factor 3 be intersectorally mobile, the equilibrium conditions are:
a11w1 a31w3 p1
a22 w2 a32 w3 p2
a11 y1 z1
(6)
a22 y2 z2
a31 y1 a32 y2 z3
As with the m × 1 case, the zero profit conditions in the specific factors model are a system of
two (n) equation in 3 (m > n) unknowns. So, once again, the endowments must be used to solve
for relative factor returns; and changes in endowments will affect relative factor returns.
19
The original references, MacDougall (1960) and Kemp (1964), were concerned with capital mobility. However,
since both factors were globally fixed endowments, there was no particular distinction between capital and labor. In
fact, precisely this model was deployed around the same time to examine labor mobility (Grubel and Scott, 1966;
Johnson, 1967; Berry and Soligo, 1969).
~ 12 ~
Recognizing that the aij are functions of the factor returns we can use the full employment
conditions for factors 1 and 2 to eliminate the yj‘s from the last full employment condition:
a11w1 a31w3 p1
a12 w1 a32 w3 p2
(6')
a31 w1 , w3
a w , w
z1 32 2 3 z2 z3
a11 w1 , w3
a22 w2 , w3
This system of 3 equations can be used to solve for the 3 factor prices. This model has a
graphical representation that looks like Figure 2, but where the figure now represents a single
economy. With free mobility of the mobile factor between sectors, the economy-wide
equilibrium is picked out in exactly the same way as in the global economy. For the purposes of
analyzing international migration and its effects, labor is the internationally mobile factor in the
m × 1 model, in the specific factors model the internationally mobile factor need not be the intersectorally mobile factor (although it very commonly is assumed to be). This model tends to be
used under either of two interpretations. In the original versions, by Samuelson and Jones, the
analyst thinks of the sectors as using specific factors in the long run: immigrants enter a mobile
labor force in which one sector (say, agriculture) always uses land and labor, while the other
sector (say, industry) always uses capital and labor. On the other interpretation, due to Mayer
(1974), Mussa (1974) and Neary (1978), the specific factors model represents a time horizon
between the very short run where no factors are mobile and the very long run where all factors
are mobile.20 Under the second interpretation, the specific factor is generally sector specific
capital, which becomes mobile over (generally unmodeled) time.
[Figures 4a & b about here]
The income distribution effects of international factor mobility are straightforward. In Figure 4a
the internationally mobile factor is also the intersectorally mobile factor, z3. An increase in the
quota on the internationally mobile factor expands the base of the diagram, increasing the output
of both sectors (as some of the immigrants are allocated to each sector and factor 3 has positive
marginal physical product in both sectors), reducing the return to all units of the mobile factor
previously resident in the country, and raising the return to both immobile factors (the triangular
regions reflecting return to specific factors are both larger and, since the number of units of the
specific factors are unchanged, the payoff per unit of specific factor must increase).
Furthermore, since the price of the country‘s good is unchanged, this implies a real increase in
the return to the specific factors and a real fall in the return to the mobile factor. That is, letting a
―hat‖ denote proportional changes:
20
An alternative representation of the medium term is a model in which both factors are imperfectly mobile (e.g.
Hill and Mendez, 1983), but the tractability of the standard specific factors model has made it the much more
common choice.
~ 13 ~
rˆ1 , rˆ2 pˆ1 , pˆ 2 0 rˆ3 .
(7)
A change in the quota for a specific factor, say factor 1, will shift up the value marginal product
of factor 3 curve for sector 1, reflecting the fact that mobile factors now cooperate in production
with more factor 1. This obviously raises the return to the mobile factor and lowers the return to
the specific factor in sector 2. The return to specific factors in sector 1 are a bit trickier:
graphically, the triangular area reflecting the total return to factor 1 owners, r1 z1 , is larger, but z1
has increased by the amount of the immigration. However, we know that the price of good 1 is
unchanged and, from the general weighted average property of price changes,21
pˆ j ij rˆi ,
(8)
iI
so, since there are only two inputs (z1 and z3), and we know that r3 has gone up, it must be the
case that r1 has fallen. Thus, for the case of an increase in the endowment of z1, we have:
rˆ1 , rˆ2 pˆ1 , pˆ 2 0 rˆ3 .
(9)
The effects on output are equally straightforward. An increase in the endowment of the
intersectorally mobile factor will raise the output of both sectors, but by proportionally less than
the endowment increase. The latter fact follows from the fact that, in each sector, there is
positive by diminishing return to any factor. Similarly, an increase in the endowment of one of
the intersectorally immobile factors will cause the sector using that factor to expand, but by
proportionally less than the increase in the endowment; and will cause the other sector to
contract.
A simple alternative to the specific factors model is the 3 × 2 model in which all three factors are
intersectorally mobile and every good uses all three factors in production. Ruffin (1981) extends
the ―friends and enemies‖ language of Jones and Scheinkman (1977), to include: factors i and k
wi
wi
are friends if
0 and enemies if
0 . For the general m > n case, Ruffin uses
zk
zk
Samuelson‘s reciprocity relationship, to show that friendship is reciprocal (i.e. if i is a friend to k,
the k is a friend to i); and that every factor has a friend. For the 3-factor × 2-good case, Ruffin
then shows that, without loss of generality, there is always an assignment of labels to factors
such that, for I = {1,2,3} and J = {1,2}:
a11 a31 a21
,
a12 a32 a22
(10)
Letting ζij denote the distributive share of factor i in sector j, i.e. (riaij )/pj, (8) follows from totally differentiating
the zero profit condition for good j and solving in terms of proportional changes. See Jones (1965) or Jones and
Scheinkman (1977). A more detailed presentation can be found in Silberberg and Suen, (2001, Section 18.3).
21
~ 14 ~
and the weak inequalities can be replaced by strict inequalities if no two factors are used in the
same proportions across sectors. In the case of strict inequalities, Ruffin refers to factors 1 and 3
as extreme factors, and 2 as the middle factor–as a result, in the case of strict inequalities, Ruffin
refers to (24) as the factor extremity condition. Under this condition, Ruffin proves:
Theorem: If there are three factors and two goods produced in a competitive, small open
economy operating under constant returns to scale, an increase in the supply of an extreme factor
will benefit the middle factor and hurt the other extreme factor.
Thus, under the labeling convention of the factor extremity condition, factors 1 and 2 are
enemies to each other and friends to 3, while factor 3 is a friend to both 1 and 2. One of the
attractive features of this model is that the result depends only on factor-intensity ranking, and
not at all on details of the substitution elasticities.22
For reasons that will be clearer following the discussion of the general m × n case, strong,
general results on the link between endowments and outputs will not be forthcoming. Unlike the
specific factors model, in the general 3 × 2 model, what emerges are a number of cases, where
outcomes depend on delicate relations of factor intensities and relations of factor
substitutability/complementarity (Jones and Easton, 1983; Thompson, 1985; 1987 section 2).
Thompson and Clark (1983) apply this framework to US data, with y = {agriculture,
manufacturing} and z = {skilled labor, unskilled labor, capital}, finding capital and skilled labor
to be extreme factors, while unskilled labor is the middle factor. Thus, if current immigration in
the US raises the endowment of unskilled labor, Ruffin‘s theorem implies that the wage of
unskilled labor should fall and that of skilled labor rise, producing a change in the wage premium
of the sort that was observed in the 1980s. Thompson and Clark (1990) extend this analysis to a
4 × 3 model–y = {agriculture, services, manufacturing} and z = {unskilled labor, semiskilled
labor, skilled labor, and capital}–finding unskilled labor a friend to capital and skilled labor, and
an enemy to semi-skilled labor. The magnitudes, in both cases, are such as to suggest that the
only sizable effects will be that of unskilled labor on itself. These results seem loosely consistent
with those we have already reported in both the labor and trade research frameworks.23
It should be noted that all of the implementations of the m > n model we have mentioned were of
the form m = n + 1. One might reasonably wonder whether the results applied in this work are
sensitive to this particular dimensional assumption. Jones (1985) shows that the answer is ―yes‖.
22
Of course, the substitution elasticities affect the magnitudes. Jones and Easton (1983) is an exceptionally useful
development and exposition of this model, with a particular emphasis on the role of economywide elasticities and
their conceptualization. Thompson (1983a; b) and Davies and Wooton (1992) develop the application of this model
to migration in some detail. Clark and Thompson (1990) and Davies and Wooton also consider the effect of
migration on the source country in this model.
23
Clark and Thompson (1986) carry out a similar analysis on Canadian data, but use 5 job categories and capital for
a 6 × 5 model. In that case, all but highest skill category (L1: professional, technical, managerial, and
administrative) bear the same relationship to capital and L1, and to each other: enemies to each other and friend to
capital and skilled labor (i.e. L1).
~ 15 ~
Specifically, Jones notes that when m = n + 2 (or more) it is no longer possible to identify the
qualitative effect of endowment change on factor wage from factor intensity. It is now necessary
to have specific knowledge of factor substitutability as well.24
2.4. Factor Mobility in m-factor × n-good models
For the general case of m factors used to produce n final goods, according to production
functions which are linear homogeneous, strictly quasi-concave, and twice differentiable, we can
represent the technology with the m × n matrix A = [aij] and the equilibrium by the system of
full- employment and zero-profit conditions given in (1):25
Ay z
Aw p
Differentiating this system yields:
s
kI
ik
dwk aij dy j dzi , i I ;
jJ
aij dwi
iI
where we have used the fact that daij
aij w
wk
kI
for
y da
jJ
j
ij
in the first equation; and
w da
iI
(11)
dp j , j J ,
i
ij
dwk , and sik : y j
jJ
aij w
wk
, to substitute
0, by cost minimization, in the second.26 In
matrix form (26) is:
S A dw dz
A 0 dy dp .
(12)
Following Jones (1965), we can also write this framework in terms of proportional changes:
ˆ zˆ
w
0 yˆ pˆ ,
24
(12)
Jones then offers a useful result which rules out certain patterns of response of the wage vector to changes in the
endowment vector, and which generalizes Ruffin‘s theorem, given above.
25
It should be clear that, since we are treating z and p as parametric, all of the results we will discuss below are
derived only from technological conditions. For a closed economy, or for a large open economy, we also need to
consider the role of tastes. When this is the case, we often make assumptions that render tastes essentially irrelevant
to the analysis—e.g. identical homothetic preferences. However, we should not forget that preferences can interfere
dramatically with otherwise standard results. For examples of these problems, see Deardorff (1986) on comparative
advantage and Opp, Sonnenschein and Tombazos (2009) on the Rybczynski theorem.
26
Note that sik shows how economy-wide demand for factor i changes in response to an increase in wk.
~ 16 ~
where we let ij
wi aij
pj
, ij
y j aij
zi
ws
, ik k ik z , and a ―hat‖ denotes proportional change. σ is
i
a matrix of economy-wide substitutions elasticities, with a negative diagonal and zero row sums.
Furthermore, we also know that both θ and λ have unit row sums—that is, they are nonnegative, row-stochastic matrices. Thus, the entire matrix is row stochastic.
S A
K G
, and its inverse B 1 :
Now if we denote the first partitioned matrix, B :
, the
A 0
G L
comparative statics in which we are primarily interested, dw/dz and dy/dz, are contained in:27,28
ˆ M
dw K G dz
w
dy G L dp or yˆ Q
N zˆ
.
R pˆ
(13)
The submatrix K gives us the effect of a change in the endowment vector on the wage vector
(dw/dz). If m ≥ n, it can be shown that K is a symmetric, negative semi-definite matrix with rank
m - n – to be denoted R(K) = m – n hereafter (Diewert and Woodland, 1977 appendix lemma 3;
Takayama, 1982 theorem 7). Thus, when m = n (the ―even‖ case used extensively in the
27
It is important to note that B is nonsingular if, and only if, the rank of A, R(A), is n (Chang, 1979 lemma 1;
Takayama, 1982 theorem 4). Since A is m × n, this means that B is singular if m < n (i.e. the number of produced
commodities exceeds the number of factors).
28
It is useful to note that we can derive B-1 directly from an economy‘s GDP function. If we denote by Y(z) the set
of outputs producible given the economy‘s technology sets and endowment,
Y z y y j f
j
z , z
j
j
0; z j z; y 0 ,
jJ
we can define the GDP function as:
G p; z max p y y Y z .
y
Assuming G() is twice differentiable, denoting derivatives with subscripts, and using the derivative properties of
the GDP function (Woodland, 1982, section 3.7), we have:
Gzz
G
pz
w
w
p
Gzp z
B 1.
y
y
G pp
z
p
That is, B-1 is the hessian matrix of the GDP function. From the assumption that the function is C2, and Young‘s
theorem, we have the symmetry that underlies Samuelson‘s reciprocity conditions. From concavity in z we have
that Gzz is negative semi-definite and symmetric, and from convexity in p we have that Gpp is positive semi-definite
and symmetric. However, not surprisingly, those properties depend on dimensionality. For example, if n > m, Gpp
will not be well defined.
~ 17 ~
literature), K is a zero matrix.29 So, in the even case, endowment change has no effect on factor
prices. Again, Leamer (1995) calls this important result the factor-price insensitivity theorem.
This is the one-country version of the more well-known, but empirically more dubious, factorprice equalization theorem. The maintained assumption of a common A matrix before and after
an immigration shock seems much more empirically plausible than assumption that A matrices
are common across countries.30
If m > n, the negative semi-definiteness of the K matrix implies that ∂wℓ/∂zℓ ≤ 0. That is,
if the endowment of factor ℓ, z , rises, the return to zℓ cannot rise—factor-price insensitivity will
not generally hold in this case. This is, of course, what our intuition tells us should be the effect
of immigration on wages. Note, however, that it depends on the prima facie least plausible
assumption about the relative dimensionality of endowments versus produced commodities. We
return to this later, but it is worth noting that most empirical work seems to find support for a
world in which there are many more commodities than factors and multiple cones of
diversification (Bernstein and Weinstein, 2002).31 The empirically plausible case of n > m is
tricky because in this case B is singular and, thus, cannot be inverted for comparative static
purposes. The problem is that the production structure is indeterminate. However, at least for
factor-price insensitivity, this is not so dire. First, as is often pointed out, if prices are
parametrically given (the small country case), however many goods there are in the world, the
small open economy will generally produce only n = m, with which we have already dealt
(Samuelson, 1953/4 paragraph 9; Jones and Scheinkman, 1977 pg. 917). For the case of n > m
in equilibrium, Chang (1979) develops an analysis by partitioning the A matrix into two matrices.
We suppose that R(A) = r > 0 and rearrange the columns of A such we can partition A into two
matrices such that A1 is m × r and R(A1) = r, and A2 which is m × (n – r). That is, A1 has a rank
equal to the number of linearly independent columns in A so that R(A) = R(A1). Chang shows
that if r = m, factor-price insensitivity holds (theorem 5).32 This makes sense, as before, the
columns of the A1 matrix define a non-degenerate cone in m-dimensional factor-space. As in the
m = n case, the endowment cannot change so much that the new endowment falls outside the
initial cone of diversification, implying that some commodities cease production. Subject to that
caveat, however, factor-price insensitivity continues to hold in the m < n case.
Recall that the j‘th column of A gives the technique in use in sector j. Together, the optimal input vectors
described by the columns define a cone in input space. When each of these vectors is unique, A has rank m = n, and
the cone is non-degenerate. As long as the new endowment remains in the interior of that cone, i.e. m = n before and
after a change in the endowment vector, such an endowment change will have no effect on factor prices as changes
in output-mix will suffice to absorb the change.
30
Of course, in the one country case, this relies on an unchanged international price and unchanged set of goods in
production.
31
The presence of multiple cones holds out the prospect that m = n is an empirically plausible maintained
assumption from which to begin. Of course, in a sufficiently short period of time factors are specific to industries,
the assumption of m > n becomes more reasonable.
32
Chang‘s analysis is actually in terms of factor-price equalization but, as we have already argued, the formal
adjustment is literally rhetorical, while the empirical referent of FPI seems better grounded than that of FPE.
29
~ 18 ~
For the effect of immigration on output, i.e. dy/dz, rather than the sub-matrix G in matrix
equation (13), we will work with the proportional changes given in Q. The rows of Q show the
effect on a given sector of an increase in each factor, while the columns show the effect of an
increase in the endowment of a given factor on the output of every sector. When m = n, as long
as the endowment change remains within the original cone of diversification and commodity
prices are unchanged, factor-prices are unchanged, so there is no change in the technologies of
production. In this case it can be shown that every column in Q has at least one negative element
and one element greater than 1. That is, an increase in any given factor will cause some sector to
increase output by proportionally more than the proportional increase in that factor, and cause
some sector to contract. In terms of the rows, it can be proved that every row has at least one
negative entry; however, even in the m = n case it cannot be proved that every row must have an
entry greater than 1.33 That is, every sector has a factor whose increase will cause the sector to
shrink, but need not have a factor that will cause it to expand by proportionally more than the
endowment increases. This is a generalization of the Rybczynski theorem of the HOS model,
which we will discuss in more detail below. 34
For the case of m > n, even with commodity prices constant, a change in the endowment
vector (migration) can still affect factor prices which, in turn, will cause a change in the
technologies in use (i.e. the aij(w)). For this case, then, while we can still show that every row of
the Q matrix possesses at least one negative element, we cannot prove that it possesses an
element greater than one.35 Furthermore, we cannot prove anything in general about the
columns. Thus, while each sector has an enemy, we cannot prove that it has a friend; and we
cannot prove that each factor is a friend to any sector or a friend to any sector.
The literature on dimensional generalizations of the main theorems of trade models can
be frustrating. There are a large number of such generalizations, all of which focus on different
aspects of the original theorems.36 From the point of view of analyzing immigration flows,
whether for framing evaluations of empirical work, as a basis for political economy modeling, or
for thinking systematically about the effects of policy, the class of generalizations considered
here seems to be the most useful. On the one hand, this is the clearest way to see and understand
the factor price insensitivity theorem, which will be of considerable importance in understanding
33
Every row will, of course, have a positive element, but it need not exceed 1. If the sector to which the row refers
is sufficiently small, ―unimportant enough‖, then the row must have an element greater than unity (Jones and
Scheinkman, 1977, pp. 931-932).
34
In the language of Jones and Scheinkman, every factor is a natural friend to some sector and a natural enemy to
some other sector; and every sector has a natural enemy and a qualified natural friend.
35
As in the even case, the problem here is the ―importance‖ of the sector.
36
The key elements of theorems like Rybczynski and Stolper-Samuelson are that the friend and enemy relations are:
reciprocal (a factor is a friend to a sector if, and only if, the sector is a friend to the factor; and similarly for
enemies); they are global (with respect to the values of the system‘s parameters); and they are characterized by
magnification. Much of the early work on generalizing these theorems sought to find conditions on the technology,
the A matrix, that retained all of these properties. For factor-price equalization, the goal was to find conditions that
yielded a globally unique, technologically determined, relationship between commodity prices and factors prices.
~ 19 ~
empirical work; and, on the other hand, magnification plays an important role in welfare and
political economy analysis. We have already asserted a presumption in terms of the m < n
version of the model, but various specific versions, with stronger comparative static, results have
been used so extensively that we will consider a number of these models in a bit more detail.
We have spent considerable time on factor-price insensitivity in the standard HO environment,
and related frameworks, because there seems to be quite a bit of misinterpretation. It is worth
noting for future reference that the sole relevant difference between the basic frameworks in use
by labor (m × 1) and trade economists (m × n) is dimensionality. First, dimensionality is not
nearly so damaging of factor-price insensitivity as it is of factor-price equalization. The former
is a one-economy comparative static result, while the second seeks to make a multi-country
comparison, requiring both strong assumptions about internationally common technology and
global univalence to make the comparisons. Second, contrary to some of the assertions by both
trade and labor economists, it does not seem to us that the choice between m ≤ n and m > n, as
interpretive frameworks, should rest on whether or not the framework generates income
distribution effects from immigration.37 Given the very weak evidence in favor such income
distribution effects, that we will discuss below, this seems doubtful in any event. But it seems
that, on any but fairly short-term interpretations of the concepts of commodity and factor, there
are massively more commodities than factors, and in this case the logic of factor-price
insensitivity holds quite straightforwardly.38 Note that we are not arguing that factor-price
insensitivity actually obtains, but that, within the parameters that are commonly agreed in the
basic labor and trade theoretic traditions, m ≤ n seems a more plausible assumption, from which
factor-price insensitivity follows. We should generally expect adjustment at the output-mix
margin to play a considerable role in responding to factor immigration. If the mechanism breaks
down, it must be as a result of deviations from those elements of the basic model that are shared
between trade and labor economists, and not on dimensionality. Thus, we now turn to several
plausible sources of such deviation.
2.5. Immigration in m × n Economies with Nontraded and Intermediate Goods
The most obvious place to start looking for deviations from the model developed in the
previous section is nontraded goods. It is at least arguable that a substantial portion of any
economy, and any OECD economy in particular, is nontraded.39 We begin, as in the previous
section with a brief discussion of the effect of nontraded goods on factor-price insensitivity in
37
Trade economists like Thompson and Wooton seem to make this argument as the entering wedge of a political
economy argument, while labor economists make the argument to shore up the foundations of their estimating
framework.
38
See Bernstein and Weinstein (2002) for a recent development of the dimensionality argument, and its implications
for tests of directions of trade predictions.
39
It has been suggested, for example, that the following sectors be considered nontraded: government services; retail
trade; wholesale trade; personal household services; restaurant services; health services; and construction. While
government services should probably be netted out of any empirical analysis as a non-market sector, the remainder
would be a sizable share of any economy.
~ 20 ~
general, and then consider several specific versions that have been applied to the analysis of
immigration. In generalizing the analysis of factor-price insensitivity to the case of nontraded
goods, there are at least two important considerations, both related to dimensionality. In the pure
generalization of the comparative static analysis, we retain the assumption that factors are not
immobile internationally and treat immigration as a comparative static increase in the
endowment of some factor. In that case, we want to know whether the dimensionality of the
wi
model affects conclusions with respect to the sign of
. However, when we turn to nontraded
zk
goods, it would seem to be incumbent upon us to be more explicit about factor mobility as well
as good mobility. Here we will want to note some results that treat the appropriate
generalization in terms of numbers of things (goods and factors) that are traded versus number of
things that are not.
Suppose that there are nT traded goods and nN nontraded goods, so n = nT + nN. We start by
noting that as long as m ≤ nT the analysis of the previous section is essentially unchanged
(Woodland, 1982; section 8.2.6.). That is, as long as there are at least as many traded goods as
factors, factor-price insensitivity will continue to obtain, under the same restrictions, and for the
same reason, as for the case without nontraded goods.40 Note the implication that, from factorprice insensitivity and cost minimization by nontraded good producers, nontraded commodity
prices are determined by supply condition alone.41 As above, if m > nT endowment shocks will
generally have an effect on wages, but this is not so much a consequence of nontraded goods as
it is of the dimensionality of the model. Now suppose, instead, that there are mT traded factors
and mN nontraded factors, so that m = mT + mN. Ethier and Svensson (1986 pg. 28) give as a
condition for factor-price insensitivity that n + mT ≥ m.42 That is, the total number of
international markets (for goods and internationally mobile factors) must be at least as great as
the number of factors. Even reducing this condition to nT + mT ≥ m, it seems to us that this
condition is likely to hold, but it also strikes us that this is a considerably more uncertain
proposition than that n ≥ m. Thus, it is probably not surprising that a number of studies
emphasize the role of non-traded goods. Before turning to a brief consideration of these, we
again note that the essential thing here is not nontraded-ness, but dimensionality and market
integration.
40
Deardorff and Courant (1990) raise the question of the effect of nontraded goods on the size of the cone of
diversification, concluding that nontraded goods tend to reduce the size (though, of course, not the dimensionality)
of the cone. In the context of factor-price insensitivity, this suggests that nontraded goods narrow the range of
endowment shocks that are consistent with factor-price insensitivity, but does not undermine the basic logic. That
is, as long as the same traded commodities are produced before and after the endowment shock, the ∂wi /∂zk will be
zero. Factor-price insensitivity will hold.
41
This follows from Pj c j
aij wi , j J , including the nontraded goods. Since the aij are functions of w,
iI
which is unchanged, cj is unchanged, and, thus, prices of nontraded goods are fixed.
42
Note that this condition can also be stated as n ≥ m - mT = mN, or when nT < n to nT ≥ mN. That is, the number of
traded goods must be at least as large as the number of nontraded factors, which is the essential condition we have
been noting throughout this section.
~ 21 ~
[Figure 5 about here]
One approach to generating wage effects from endowment changes is to assume that m = n, but
nN ≠ 0, ensuring that m > nT. Rivera-Batiz (1982) develops a 2-factor × 2-good model with one
traded good and one nontraded good. The traded good price is locked in by the small country
assumption, but the nontraded good price is determined by the interaction of supply and demand
conditions in that market. Consider a setup like that in figure 5, with good 1 skilled-labor
intensive and good-2 unskilled labor intensive, but now suppose that only good 1 is
internationally traded. Once again, we suppose that there is an increase in unskilled labor.
Following the logic of the Rybczynski theorem, as illustrated in figure 5, at fixed commodity
prices, output of the traded good (1) will fall and output of the nontraded good will expand.
Now, however, while the price of the traded good is fixed, the excess supply of the nontraded
good at initial prices leads to a fall in its price. This will cause the unit value isoquant for good 2
to shift outward and a new factor-market equilibrium will be established at a lower wL and a
higher wS. This dependence of factor-return on endowment makes this model a popular
framework for the analysis of migration.43 It is useful to note, however, that if the world actually
looks like figure 5, treating it like figure 1 for simulation purposes will produce an overestimate
of the labor market effect because it will not be taking into account the adjustments in both
demand and production that go into the determination of the final equilibrium here.44
Kuhn and Wooton (1991) develop an extension of this model to the 3-factor × 3-good case, with
one non-traded good. Let good 1 be the exportable, good 3 the importable, and good 2 the
nontraded good. Furthermore, we number factors so that, relative to the two traded good prices,
good 1 uses factor 1 intensively, good 2 uses factor 2 intensively, and factor 3 is a middle factor.
That is, we have the relationship given in (24). The analysis generates results that are very much
like those of Ruffin (1981), referred to above: an increase in the endowment of any factor
43
Bond (1993a) presents an alternative approach, emphasizing cone conditions; Kondoh (1999) extends the RiveraBatiz analysis to consider demand effects based on duration of migrant stay; while Hatzipanayotou (1994) studies
the interaction between various types of policy and immigration. This model has been used, in particular, to study
welfare effects of migration in a two-country system, with a sending and a receiving country, e.g.: Krauss (1976);
Rivera-Batiz (1983); and Rübel (1994). Interesting generalizations to higher dimensions can be found in Neary
(1989) and Bond (1993b).
44
The magnitudes of the new factor wages will depend on both production and demand conditions, but the direction
of the changes can be signed unambiguously. For example, in Jones‘ ζ-λ notation, Rivera-Batiz gives the effect on
the return to L as:
wˆ
ST Lˆ
SN Lˆ
and wˆ L PˆN
,
D S
D S
where the ζij denote factor distributive shares and the λij are shares of the endowment of factor i in use in sector j; the
hats denote proportional changes, ζS is the elasticity of substitution between goods 1 and 2 along the transformation
curve, and ζD is the elasticity of substitution in consumption between good 1 and 2. Since, ζS and ζD are both
positive, and the determinants │λ│ and │ζ│ have the same sign, and the traded good price is unchanged, these
imply a fall in the real wage of L. The equivalent expressions for wS show a real increase.
~ 22 ~
reduces the return to that factor; the middle factor is a friend to both extreme factors; and both
extreme factors are enemies to each other.45 The authors then use US data for 1960, 1970, 1980,
and 1984 to construct the vectors z = {L,S,K} and y = {exports, imports, nontraded}, concluding
that in nearly every case: skilled labor is the extreme factor in exports; unskilled labor is the
extreme factor in imports; and capital is the middle factor (and used intensively in nontraded
goods). Thus, given the model structure, the implication is that an increase in the endowment of
unskilled labor, via immigration, will tend to reduce the wages of both types of labor and raise
the return to capital. The fact that, at this level of aggregation, there is very little evidence of this
pattern of effects, might suggest that the dimensionality assumption ensuring such effects are not
a part of the world we observe.
In closing this section we briefly note that neither the existence of intermediate goods nor of joint
production undermines the general logic of factor-price insensitivity. This has been known since
the pioneering analysis of McKenzie (1955).46 Thus, factor-price insensitivity is a surprisingly
robust property of neoclassical/competitive trade models under a variety of assumptions about
the production side of the model.
3. Core Empirical Results Based on Standard Models
The preceding section considered two main comparative static questions: the effect of
endowment changes on output; and the effect of endowment changes on factor wages. Perhaps
not surprisingly, the second question has attracted by far the majority of systematic research with
specific reference to the migration of labor. Nonetheless, there has been some research seeking
to estimate Rybczynski effects. While most of this research did not specifically consider
migration, because the causal factors are so closely related, following a review of the literature
on labor market effects of immigration, this section turns to a brief discussion of empirical
research on the Rybczynski theorem.
In turning to the relevant empirical research, it is important to recall that the general
analytical framework in (12), or (12), has two common interpretations as a way of organizing or
interpreting empirical analysis. On the one hand, the referent of the analysis can be a single
country (or some other discrete economic unit), observed before and after a comparative static
shock. Alternatively, the referents can be two (or more) countries, differing only in the
comparative static shock. We have already seen this distinction in the discussion of factor-price
insensitivity versus factor-price equalization. There we noted that the auxiliary assumptions
supporting empirical interpretation (specifically, identical technological opportunities before and
after the shock) are more plausible across relatively short periods of time (for FPI) than across
This result relies on a pair of ―normality‖ conditions–one a restriction on demand and the other on supply.
See Woodland (1982; chapter 5) for an exceptionally clear development of these issues. Chang, Ethier, and Kemp
(1980) is also very useful on the issue of joint production. Recently, there has been some discussion of the effect of
joint production on the likelihood of factor-price equalization paralleling that discussed in note 65. See, in
particular: Samuelson (1992); Jones (1992b); and Albert and Kohler (1995).
45
46
~ 23 ~
countries (for FPE), and that this difference helps explain the greater skepticism as to the
empirical content of FPE relative to that of FPI. In the next sub-section, we consider empirical
work on the dw/dz comparative static. In the context of immigration, it makes sense to focus on
the dw/dz comparative static in the national context, but it should be noted that testing for FPE is
formally the same question. Then we turn briefly to empirical work on the dy/dz comparative
static. In the one country case, for the HOS model, this is the usual interpretation of the
Rybczynski theorem. However, the empirical literature has also considered cross-country
analyses of the relationship between the endowment vector and the structure of output that is
formally identical.
3.1. Empirics of Immigration and Wages
In this section of the paper we discuss some of the major findings about immigration and labor
markets that have been uncovered in recent research by labor economists. Our primary focus
here is on the contribution of immigration to the growing inequality experienced in many OECD
countries during the 1980s, and the implications of that experience for future policy. In this
section we consider in some detail empirical research by labor economists on the link between
immigration and labor market outcomes (primarily wages). Contemporary empirical research on
the labor market effects of immigration has grown quite large since its development in the early
1980s. We will divide this research into 2 broad categories: production function based studies;
and cross-sectional wage/unemployment. As we noted in the introduction, the most striking
result from that research is how small the measurable effects are of what is a fairly sizable labor
market shock.
As we note in the preceding section, whether or not the implementation takes a structural form,
the structure that drives both the econometric specification and the intuition for interpreting that
analysis is generally a one-sector, perfectly competitive model. The labor economists‘ standard
approach to wage inequality and income distribution is firmly rooted to an analysis of ―SDI‖ or
―supply, demand and institutions‖ (Freeman, 1993, pp. 444-449). To evaluate the labor market
effects of immigration, identifying how the immigration of workers with differing skills affects
the relative supply of labor can be viewed as necessary first step. In turn, the skill group
characteristics of new immigrants are affected by the returns to skill as well as the distribution of
earnings in both the source and host countries. Finally, labor market institutions are important
because they affect the degree of wage inequality, the structure of wages and the labor market
response to shocks. We place some of the latter considerations on the back burner for now and
start by outlining a template competitive labor market model. In this section we sketch this
framework in a bit more detail.
Before proceeding with this discussion we comment briefly on what may be the best known
gross distinction used to characterize this literature: area studies versus factor content studies
(Borjas et al., 1997). The problem is that the label is misleading. We have already noted, in our
discussion of figure 1, that virtually all labor theoretic frameworks apply a factor content based
~ 24 ~
approach–i.e. it is change in relative supply that generates the change in labor market outcomes.
The issue is actually about level of analysis. That is: how large must the geographic unit (i.e.
area) be such that observations on supplies and prices of various classes of labor are
independent? As we shall see, there are good reasons for believing that geographic units like
standard metropolitan statistical areas (SMSAs) or states are linked in ways that are inconsistent
with cross-sectional observations being independent draws from some distribution, but it is not at
all clear that the statistically optimal level of analysis is the nation. There is considerable
evidence that national borders have economic effects, but, by the same token, there is also
considerable evidence that quite local labor markets take significant periods of time to fully
adjust to macro shocks.47 On balance, it is not clear to us that there is a good reason to prefer
one level of analysis to another. Level of analysis is always an important research decision, but
this does not strike us as an essential distinguishing aspect in this body of research.
In addition to the issue of the appropriate level of analysis (local v. national), another essential
research question is the manner in which the common theoretical framework structures the
research. We can thus make another broad distinction between structural (or ―production
function‖) methods and regression based methods. We start with the former for the case of local
labor market data.
3.1.1. Production Function Based Methods
The most direct implementation of the framework considered in the previous section, and the
first to be developed in the current wave of research on the labor market effects of immigration,
involves selecting a specific functional form for the production function given in equation (1),
estimating that function on cross-sectional data, and testing hypotheses on the degree of
substitutability or complementarity between inputs.48 In addition, elasticities of derived demand
can then be used to carry out policy experiments—i.e. simulations. Recalling that our aggregate
production function is y = f(z), z = {z1, ..., zm}, we seek to calculate the Hicksian partial
elasticities of complementarity between any two of the inputs i and k as:
ik
f fik
, i, k I ,
fi f k
(14)
47
See Helliwell (1998) for a useful overview and extension of research on the economic effects of national borders.
On local labor markets see Topel (1986), Blanchard and Katz (1992); and Bound and Holzer (2000). White and
Mueser (1988) provide a very interesting discussion of the implications of level of analysis for studies of domestic
migration.
48
Production functions can also be estimated using time series data, but in that case one must be concerned with
technological change, certainly a concern in the apparently technologically dynamic 1980s. The equivalent
assumption, that all regions within the same country have access to the same technology set seems considerably less
demanding.
~ 25 ~
where we have used subscripts to denote partial derivatives. Following Hicks (1970; see also
Sato and Koizumi, 1973), i and k are called q-complements if ςik > 0 and q-substitutes if ςik < 0.49
Because it is easier to interpret the quantity elasticities of inverse input demand,
ik
ln wi
,
ln zk
(15)
these are usually calculated using the relationship:
ik ik k ,
(16)
where, again, ζk is the distributive share of input k.
In carrying out work of this sort, investigators must select a functional form that does not
prejudice the conclusion from the start. In particular, we would like the data to determine the
values of the elasticities defined in (14) and (16). Thus, the commonly used Cobb-Douglas and
CES forms will be inappropriate for any input vector with more than two arguments. As a result,
investigators have generally used one or another of the flexible functional forms.50 In addition to
selecting a specific functional form, the other major choice in this body of research involves the
definition of the input vector. Broadly speaking, there are two approaches here: one defines the
input vector in terms of observable characteristics (e.g. gender, age, immigrant status, etc.);
while the other seeks to identify production relevant characteristics (e.g. quantity of human
capital).
In the first paper using this approach, Jean Baldwin Grossman (1982) used crosssectional data for 1970 to estimate a translog function of native workers, first generation
immigrants, second generation immigrants, and capital.51 She finds that both first and second
49
A pair of inputs (zi, zk) are q-complements if an increase in the endowment of k causes an increase in the wage of
i; they are q-substitutes if the increase in zk produces a fall in wi. Hamermesh (1993) provides a clear discussion of
these concepts.
50
A functional form is flexible if it can approximate any arbitrary, twice continuously differentiable function in the
sense that its parameters can be chosen such that its value, gradient, and Hessian equal the corresponding
magnitudes for the arbitrary function at a given point. Lau (1986) provides an excellent discussion of the issues that
arise in choosing functional forms for empirical analysis. Chambers (1988, Chapter 5) is a somewhat more
elementary discussion, with a strong emphasis on application.
51
T he translog function is:
ln y ln f z 0 i ln zi 12 ik ln zi ln zk .
iI
iI kI
our assumptions on the technology yield restrictions: βik = βki (Young‘s theorem); and
iI
ik
iI
i
1 and
ik 0 (constant returns to scale). This yields a set of distributive share equations:
kI
i
y
i ik ln zk i , i I ,
zi
kI
~ 26 ~
generation immigrants substitute for native labor, but that second generation immigrants are
much closer substitutes for natives, and that new immigrants are closer substitutes for second
generation immigrants than for natives. In addition, Grossman finds that capital is
complementary with each type of labor, but that this complementarity is strongest with firstgeneration immigrants and weakest with natives. Grossman‘s analysis concludes with a policy
simulation using the relationship in equation (16) to calculate own- and cross- elasticities to
study the effect of a 10% increase in the number of legal immigrants in the labor force on a
short-run equilibrium in which native wages are fixed (and thus adjustment occurs on the
employment martin) and a long-run in which all wages are flexible. In the short-run, native
employment falls by 0.8%, second generation wages fall by 0.06%, first-generation wages fall by
2.2%, and the return to capital rises by 0.2%. In the long-run, wages are flexible, so all markets
clear: native wages fall by 1%, second generation immigrant wages fall by 0.8%, first-generation
immigrant wages fall by 2.3%, and the return to capital rises by 4.2%.52
In an important series of papers, Borjas (1983; 1986b; a; 1987) uses a number of data sets
from the 1980s to study different disaggregations of labor in the context of a generalized
Leontief production function.53 Depending on the particular breakdown of labor (e.g. by gender,
that can be estimated using Zellner‘s seemingly unrelated regression technique, to take the correlation among the νi
into account, to generate values for the function‘s parameters. From these, one can calculate the Hicksian
elasticities of complementarity, equation (15), as:
ii
ii
i2 i
i
and ik
ik i k .
i k
52
In related studies, Bürgenmeier, Butare, and Favarger (1991) and estimate a translog function of immigrant labor,
native labor, and capital using Swiss time series data from 1950-1986. In addition to finding qualitatively similar
results on the pattern of complementarity between factors, the Swiss study finds evidence of a positive relationship
between immigration and capital accumulation. Akbari and DeVoretz (1992) estimate a translog function on an
industrial cross-section based on Canadian data for 1980. At the economy-wide level, the Canadian study finds no
significant effect of immigrants–i.e. all Hicksian elasticities of complementarity between immigrants and natives are
insignificantly different from zero. However, when the sample is restricted to labor intensive industries only, the
Canadian study does find evidence of labor displacement as a result of immigration.
53
The generalized Leontief production function is defined as:
y f z ik zi zk 2 ,
1
iI kI
where, as with the translog function, Young‘s theorem requires γik = γki, while concavity requires γik ≥0 for i ≠ k. As
Borjas points out, the generalized Leontief production function leads to linear-in-parameters wage equations, rather
than the linear share equations derived from the translog production function. Thus, Borjas estimates
1
z
wi ik k ,
kI
zi
~ 27 ~
2
race, and immigration status), immigrants tend to be complements to some native labor and
substitutes to others, though in all cases these effects are small–except for the effects of
immigrants on other immigrants of the same type, for whom the effects can be sizeable and
negative. Given Borjas‘ more recent position as a leading opponent of immigration and searcher
for large effects, it may be worthwhile to quote his own summary of this, and other, work circa
1990:
the methodological arsenal of modern econometrics cannot detect a single shred of
evidence that immigrants have a sizable adverse impact on the earnings and employment
opportunities of natives in the United States. (Borjas, 1990, pg. 81).
In particular, Borjas fairly consistently finds that, while immigrants may be substitutes for white
native born men, and thus increased immigration may have had a small negative effect on their
labor market outcomes, immigrants are found to be complements to black native born men who,
thus, may have gained from increased immigration.
This approach is also used to examine the effects of legal Mexican immigration on labor
market outcomes of Hispanic natives (King et al., 1986) and illegal Mexican immigration on a
wide variety of labor groups (Bean et al., 1988) with essentially the same results: the first study
finds evidence of complementarity, suggesting that Mexican immigration may have a positive
effect on the wages of native born Hispanics; and the second study finds effects of legal
immigration like those in Borjas, and finds that illegal immigration may have a small negative
effect on white, non-Hispanic workers, but essentially no effect on native Hispanic workers.
The production function approach receives its most sophisticated treatment to date in a
series of papers by Michael Greenwood and Gary Hunt with a variety of colleagues. In
Greenwood and Hunt (1995), the authors are interested in examining a variety of adjustment
channels beyond change in wage. For input demands, they estimate a translog cost function on
SMSA level data for 1970, and find immigrant labor to be a substitute for domestic labor.54 In
addition, they estimate labor supply functions and aggregated output demand functions for the
on individual level data, sorted by SMSA, usually with a variety of controls. Borjas estimates these labor demands
using both OLS and a two-stage least squares procedure to control for endogeneity of labor supply, though the latter
generally has little impact on the results.
54
The translog cost function is:
ln C w; y i 0 ln wi ik ln wi ln wk ln y,
iI
iI kI
with βik = βki, and the share equations are, from Shephard‘s lemma,
i i 0 ik ln wk i , i I .
kI
The elements of the z vector are domestic labor, immigrant labor, and capital.
~ 28 ~
local markets. With these results they construct a large number of simulations permitting
adjustment via flexibility in native labor supply (via both variable participation rates and internal
migration) and changes in demand for final output, as well as adjustment along a given isoquant
as in the previous studies. As with the previous studies, the wage, and now labor force
participation, effects of immigration are uniformly small and, perhaps not surprisingly the
magnitude of effects generally fall with the opening of additional channels of adjustment. The
final output demand channel in particular seems to have a consistent effect of reducing the wage
effects of immigration (or even making the effects on natives positive). These results can be
seen to be closely related to our claim that, with multiple sectors the existence of adjustment at
the output mix margin will generally lead to smaller effects.
By the mid- and late-1980s, researchers working in applied production analysis had
begun to recognize that standard flexible functional forms (including both the translog and
generalized Leontief forms) could fail to satisfy concavity, but that flexibility may be destroyed
if concavity is imposed globally (Diewert and Wales, 1987). Greenwood, Hunt, and Kohli
(1996) begin their analysis by pointing out that virtually all of the studies we have reviewed to
this point present results indicating the presence of failures of concavity, in addition they
estimate CES, translog, and generalized Leontief cost functions on a common data set to
illustrate violations. As a result, they conduct their analysis using the symmetric normalized
quadratic form, developed by Diewert and Wales (1987), that permits curvature conditions to be
imposed globally without endangering flexibility.55 The authors calculate the Hicksian
elasticities of complementarity and find that native labor and immigrants are q-substitutes, while
all other input pairs are q-complements. Thus, an increase in immigrants would lower the wage
of native workers, and raise the wage of non-recent immigrants and capital, but these effects are
quite small. For example, a 10% increase in the supply of recent immigrants would reduce the
wage of native-born labor by 0.96%. The effect of this change on other recent immigrants,
however, is quite large. Parasnis (2010) uses this form for the analysis of Australian data,
reporting a complementary relationship between immigrant and native labor.
The research that we have considered to this point focused on immigration status, among
other things, as a production-relevant fact. Rivera-Batiz, Sechzer, and Gang (Rivera-Batiz and
Sechzer, 1991; Gang and Rivera-Batiz, 1994), however, argue that there is no particular reason
55
The symmetric normalized quadratic functional form of the unit cost function is:
c w
1
2
w w
b w ,
w
iI
where βik = βki, and
kI
ik
0, βi ≥ 0 and
iI
i
ik
iI k I
i
i
i
k
iI
i
i
1. Diewert and Wales (1987) provide a method for imposing
global concavity and show that it does not undermine flexibility. The elements of the z vector in Greenwood, Hunt,
and Kohli (1996) are native labor, recent immigrant labor, non-recent immigrant labor, and capital.
~ 29 ~
to believe that immigrant status, or race or gender, is directly production relevant. They prefer,
instead, to assume that individuals with identical bundles of production relevant traits will
receive the same wage. As a result their strategy involves estimating a translog production
function of education, experience, and unskilled labor to derive the relevant Hicksian elasticities,
and then using data on the skill composition of immigrants versus natives to derive distributional
effects. Like Borjas and Bean et al., they use individual data sorted into local market areas to
estimate, like Grossman, a translog production function, and then use equation (14) to get the
Hicksian elasticities of complementarity, and (16) to get the relevant factor demand elasticities.
In the first stage they find, for both US and European data, that own supply elasticities are
negative, as expected, and that the cross-elasticities imply that unskilled labor, education, and
skill are all complements for one another (i.e. ςik > 0 for i ≠ k). In addition, own elasticities are
all estimated to be considerably larger than cross-elasticities. The authors then construct skill
inventories of immigrant and native groups and use those, along with the estimated elasticities, to
compute composite elasticities of complementarity that summarize this information. As with
other work that we have reported, there are a variety of sign patterns, but ―the impact of all the
immigrant groups on all the native-born groups are small in absolute magnitude‖ (Rivera-Batiz
and Sechzer, 1991, pg. 106). The largest effect is that of Mexican immigrants on MexicanAmericans, where an increase in Mexican immigration of 10% will result in slightly less than an
1% fall in wages of Mexican-Americans (with a similar effect on native black labor). Similarly
small results are found for the European case in Gang and Rivera-Batiz.
Finally, Greenwood, Hunt, and Kohli (1997) mix the approaches of Grossman and Borjas
with that of Rivera-Batiz by disaggregating native and immigrant labor into four skill categories
each (based on earnings), as well as capital, and estimating a symmetric normalized quadratic
cost function on a cross-section of SMSAs.56 Not surprisingly, given the number of factors,
there is quite a variety of q-substitutability and -complementarity, but unskilled immigrants
appear to be strong q-substitutes for low- and medium-skilled native labor, and q-complements
for unskilled native labor. Once again, however, the authors are unable to find any evidence that
unskilled immigration leads to large changes in the income distribution or in employment
opportunities, with the exception of the effect on other unskilled immigrants.
All of the preceding research considers essentially closed economies. A small number of
papers develop analyses of immigration in the context of economies that are open to trade. For
example, Wong (1988) works with an indirect trade utility function which is, itself, a function of
56
In a study of the impact of low-skilled migration from Mexico, Davies, Greenwood, Hunt, Kohli, and Tienda
(1998) estimate a symmetric normalized quadratic production function in which the arguments are: low-skilled
natives divided by gender and ethnicity (Mexican, non-Mexican); native high-skilled males and females (one
category); foreign born, low-skilled Mexicans; foreign born, low-skilled non-Mexicans; and capital. As in the
previous studies, the authors find that in both 1980 and 1990 immigrants has negative effects on the native born, but
that these effects were small. The effects on other immigrants were found to be large. Furthermore, whatever might
be the effects of trade and factor mobility within the US, the effects are larger in areas of high immigrant
concentration.
~ 30 ~
the GNP function.57 This function is estimated, in translog form, on prices for home produced
durable goods, home produced nondurable goods and services, and imported goods and services,
and endowments of capital, land, and labor, for a number of years between 1948 and 1983.
Foreign capital and labor are taken to be perfect substitutes for the domestic factors, so the
comparative statics on the indirect utility function can be used to generate the relevant
elasticities. These elasticities are all small. Kohli (1993; 1999; 2002) develops this sort of
analysis in considerably greater detail. Specifically, using annual Swiss data from 1950-1986,
Kohli (1999; 2002) estimates the translog cost function associated with the primal GNP function
and a z vector containing capital, home labor, immigrant labor, and imports.58 Thus, where
Wong treats home and immigrant labor as perfect substitutes, Kohli is able to test this
relationship. In fact, Kohli finds that home and immigrant labor are both Allen-Uzawa and Hicks
q- substitutes, though not perfect substitutes. Commodity imports and immigrant labor are found
to be both Allen-Uzawa and Hicks q- complements.59 Once again, the magnitude of the
estimated effect of immigration on native wages is negative, but quite small. However, Kohli
simulates a short-run model in which the wage is downward inflexible, and finds the effect on
home labor displacement to be large. Hijzen and Wright (2010) estimate a translog function with
two types of domestic and immigrant labor, skilled and unskilled, along with capital and traded
intermediates, and two types of output. Like a number of other production function based
studies, Hijzen and Wright find that the largest effect of unskilled immigrants is on unskilled
immigrants already in the labor force, and that is small. The impact on native unskilled workers
is also negative, but even smaller. Skilled immigrants have little effect on the structure of factor
payments at all.
Overall, econometric research which explicitly exploits production theoretic structure,
tends to find strong substitutability between immigrants and other immigrants of the same
vintage and national origin and, otherwise, widely varying patterns of complementarity and
substitutability between immigrants and natives (as measured by the Hicksian elasticity of
complementarity). More importantly, the elasticities between immigrant and native labor are
consistently small, and are smaller yet when other channels of adjustment than the wage are
explicitly permitted in the analysis. That is, natives and immigrants are consistently found to be
quite imperfect substitutes in production.
57
Letting p, z, and b be the parametric price vector, endowment vector, and trade balance, the indirect trade utility
function is defined as:
H p, z, b : max u y p y G p, z b V p; G p, z b ,
y
where G() is a standard GNP function and V() is the indirect utility function of the representative consumer.
58
Kohli (1993) directly estimates a symmetric normalized quadratic GNP function on the same Swiss data. The
results are broadly the same, increased immigration reduces home wage, but only weakly; and trade and
immigration are found to be complements.
59
Interestingly, imports and capital are Allen-Uzawa substitutes, but Hicks q-complements.
~ 31 ~
3.1.2. The Regression Based Approach to Estimating Wage Effects of Immigration60
While the production-theoretic framework directly implements the theory that forms the basis for
much of the labor-theoretic research on the labor market effects of immigration, its requirements
are demanding. To be set against the advantage of directly estimating cross elasticities of
substitution is the reliance on functional form assumptions to identify the parameters of interest.
As mentioned in the previous section, structural estimation of this sort invariably needs to tradeoff the requirements of functional form flexibility, or ease of estimation, and strict adherence to
the restrictions implied by the theory. In addition, while human capital variables can relatively
easily be accommodated in the production-theoretic framework, the incorporation of a wide
range of standard control variables does not fit easily within this framework. Thus, as a result of
the relative ease of application, greater similarity to existing techniques in labor econometrics
and the desirability of including a richer set of controls, the majority of the research on the labor
market effects of immigration has taken place within a regression framework. The latter
approach generally involves reduced form regression analysis of the use of natural experiments
to examine empirical regularities and determine ―causal‖ relationships.
As above, we assume two types of labor, skilled (S) and unskilled (L), for simplicity.61
Within each skill class, domestic and immigrant labor is assumed to be equally productive. Other
factors of production, such as physical capital, land and so on are left in the background by
assuming a fixed price and applying a separability assumption. Following Altonji and Card
(1991), we suppose that the economy produces one good according the production function Y =
f(S, L).62 This good is consumed and is exchanged at fixed world prices for another consumption
good.63 We will find it convenient to work with the total cost function:
C wS , wL ; Y Yc wS , wL ,
(17)
where c(•) is the unit cost function.
We suppose that there are L unskilled workers and S skilled workers in the economy and
define total labor force as Λ ≡ L + S. We define the per capita labor supply functions of skilled
and unskilled workers, respectively, as: ls(ws) and lL(wL). Because, by Shephard‘s lemma, the
c w
, we can write the conditions for a local labor
unit labor demand functions are ci w
wi
market equilibrium as:
60
There is a parallel literature applying regression analysis to unemployment. We focus on the wage results
primarily because of the close link to the theory. We simply note here that the primary conclusions of this section–
i.e. small to no effects, except on migrants of similar origin and vintage, and the least skilled native workers–holds
as well for unemployment.
61
It should, however, be noted that this is not without loss of generality (Hamermesh, 1993, pp. 33-42).
62
As above, we take f() to be twice differentiable, linear homogeneous, and strictly quasi-concave.
63
As a result of the small country assumption, the foreign good will not enter our analysis explicitly, so we do not
introduce any notation for it. The foreign good will be our numeraire.
~ 32 ~
SlS wS YcS w and LlL wL YcL w .
(18)
To focus on the impact of unskilled immigration, we will represent migration as an influx
of unskilled workers into the economy. Let λL := L/Λ, the proportion of unskilled workers in the
labor force. Totally differentiating (18), suppressing arguments, and using obvious notation, we
have:
Y
Y
L lLL dwL lL d L cLS dwS cLL dwL .
1 L lSS dwS lS d L cSS dwS cSL dwL
(19)
Defining εi as the elasticity of the labor supply and εik as the elasticity of labor demand for skill
group i with respect to wage k, the equations (19) may be rewritten as:
1 L S
lS
c
c
Y
dwS lS d L SS S dwS SL S dwL
wS
wS
wL
l
c
c
Y
L S L dwL lL d L LS L dwS LL L dwL .
wL
wS
wL
(20)
Letting hats (i.e. xˆ dx / x ) denote proportional changes, and using equation (20) to simplify, we
have:
1 L S wˆ S d L SS wˆ S SL wˆ L
L L wˆ L d L LS wˆ S LL wˆ L
(21)
The labor demand elasticities are governed by the usual Hicksian formula, i.e., for given
wage changes
ik k ik ,
(22)
where ζk is the distributive share of labor type k, ζik is the partial elasticity of substitution
between labor types i and k, and ξ is the elasticity of final output demand with respect to its
relative price p.64
Comparative statics on equations (21) are straightforward. For instance, when the
demand for skilled labor is independent of the wage paid to unskilled labor (i.e. εSL = 0), we have
64
Recall that we have taken the importable as our numeraire, so p = P/P*, where the star denotes a foreign
magnitude.
~ 33 ~
wˆ S
1
d 0
1 L S SS L
(23)
Similarly, when the demand for unskilled labor is independent of the wage paid to skilled labor
(i.e. εLS = 0), we have
wˆ L
1
d L 0.
L L SS
(24)
Equations (23) and (24) are immediately instructive. As suggested in the extensive literature on
the LeChatelier-Samuelson principle, the long-run impact on wages is likely to be far smaller
than the short-run impacts. Similarly, it is easy to see that if factor-price equalization causes
these elasticities to approach infinity, there will be no wage effects.65
Equations (23) and (24) can be used directly to derive implications for the correlation
between wages and shares of immigrants in a local labor market (see e.g. Altonji and Card,
1991). An alternative approach to evaluating the empirical relationship between skilled and
unskilled wages is to assume an explicit functional form for the technology and use equation (18)
to develop an estimating equation. For illustrative purposes, suppose that Y is produced from
skilled and unskilled labor according the following CES function:
1
Y A S zS L zL ,
(25)
where ζSL = (1 - ρ)-1 ≥ 0. The parameter A indexes factor-neutral total factor productivity; and
the ηi index biased technical change that increases the ―effective‖ quantity of the relevant input.
The cost function associated with this production function is (Varian, 1992, pg. 56):
1
wL 1
Y wS
C wS , wL ; Y
A S
L
1
.
(26)
Using Shephard‘s lemma and taking the ratio of the unit labor demand functions, we
obtain the relative demand for labor within a sector or location as:
1
cL wS , wL S 1 wL 1
.
cS wS , wL L wS
Local labor market equilibrium requires that
65
This conclusion is insensitive to the assumption that εSL = εLS = 0.
~ 34 ~
(27)
1
L lL wS , wL
1 w 1
S L ,
1 L lS wS , wL L wS
(28)
where the left hand side is the ratio of the supplies of unskilled to skilled labor. Solving for
relative wages and taking natural logarithms gives a regression specification:
L lL wS , wL
w
ln L ln L 1 ln
.
1 L lS wS , wL
wS
S
(29)
Equation (29) provides a general framework for understanding the determinants of
relative wages. It should be kept in mind that the relative wage changes for different skill groups
are for within local or regional labor markets. The link to outside markets comes from
specifying how they respond to changing wages (i.e. the εi). Equation (29) can then be used to
examine the determinants of relative wages across different (and fully separate) labor markets.
Borjas et al. (1997) constitutes a prominent example of this type of approach. What they term
the ‗aggregate factor proportions approach‘ involves regressing the ratio of skilled wages to
unskilled wages in year t, on the relative labor supply of the two types of labor. Borjas et al.
(1997) find that immigration affected certain groups of workers more so than others.
Specifically, immigration may have been responsible for the decline in the earnings of unskilled
native workers that occurred during the 1980s. Their paper has contributed to the view that,
relative to the effects of growing international trade with less developed countries, immigration
may have had a proportionately larger negative impact on the earnings of unskilled U.S. workers.
A qualitatively similar approach is used to derive estimating equations for regional
unemployment or wages. For example, Altonji and Card (1991) and LaLonde and Topel (1991)
estimate wage equations taking the form:
wj j X X j j ,
(30)
where j indexes the local labor market, w is the logarithm of the wage for a particular skill group,
X is a vector of control variables and, as above λ is the proportion of immigrants in the jth local
labor market. In contrast to the above study by Borjas, et al. (1997), these studies find scant
evidence that recent waves of immigration have disadvantaged U.S. workers.
To eliminate region-specific fixed effects, due to ethnic enclave effects, for example (see
Bartel, 1989), the first-differenced version of equation (30) can also be estimated. More
generally, if the immigrant share in market j is correlated with unobservable variables only
through a time-invariant individual fixed effect, then estimating fixed effects regressions may be
appropriate (e.g. see Altonji and Card, 1991; Topel, 1994a; b). LaLonde and Topel (1991)
estimate both equation (30) and its differenced version and find that the estimates of the effect of
~ 35 ~
immigration produced by the two methods are nearly identical, i.e., the wage effects are
negligible.
Unfortunately, fixed effects estimation is not a cure all for most sample selectivity and
endogeneity problems. In the case of immigration and wages, the very nature of sorting on
unobservable variables suggests that the migration decision of individuals may involve a process
of learning about what is their correct state (i.e., industry, occupation, location, etc.). We discuss
the endogeneity and sample selection further below in connection with the instrumental variables
and natural experimental approaches to the study of the impact of immigration.
Of course, the regression specifications based on either equation (29) or (30) are quite
general. For instance, there have been many studies using the regression framework that have
focused on the importance of the large increase in the relative supply of workers during the
1970s to the increasing wage inequality that occurred throughout the later 1980s and early 1990s.
The increase in the U.S. workforce caused by the labor force entry of the baby boomers easily
dwarfs the increase in the labor force caused by immigration. Welch (1979), Berger (1985),
Murphy, Plant and Welch (1988) and Murphy and Welch (1991) are among the better-known
U.S. studies here. A common finding of these studies is that changes in cohort size associated
with the Baby Boom generation did not have a significant impact on cohort earnings. Overall,
supply-side changes in the United States were very quickly discounted as a candidate
explanation for the increased dispersion in the income distribution in the United States during the
1980s.
Notwithstanding, the preceding findings on the effects of domestic labor supply shocks
do not necessarily imply that all supply-side ―shocks‖ are unimportant. In the current context,
some authors claim that immigration may have been responsible for the decline in the earnings
of unskilled native workers that occurred during the 1980s. The immigration issue has been
increasingly seen as one of ―distribution‖ rather than ―efficiency‖ (see Lalonde and Topel, 1997).
Freeman (Freeman, 1998, pg. 110) argues that immigration may have had substantially larger
effects on native unskilled workers than increased international trade with low-income countries,
for instance. During the 1980s, a period during which wage inequality rapidly increased in the
United States, immigration raised the supply of high school dropouts by approximately 25
percent, which far exceeds the increase in the ―implicit labor supply‖ of such workers
attributable to trade. Furthermore, Borjas et al. (1992; 1997) conclude that the large increase in
the number of unskilled immigrants explains about one third of the decline in the relative wage
of high school dropouts during the 1980s. For the United States, wage inequality increased most
in the West where the largest inflow of less-skilled immigrants was experienced (Topel, 1994a;
b).
In principle, changes in cohort quality can be analyzed in the same way as changes in
cohort size. Borjas (1994a) considers the declining cohort quality of recent waves of immigrants
to the United States to have been the result of the shift in U.S. immigration policy, specifically
~ 36 ~
the passage of the 1965 Immigration Act. However, his findings of decreasing cohort quality
have recently been questioned by Butcher and DiNardo (2002) who focus on changes in the
wage distribution through time. Using the methodology developed by DiNardo et al. (1996),
they investigate the counterfactual of what the wage distribution would have looked like for new
immigrants if they had faced the wage distributions from different eras. They find that earlier
immigrants would have had wages much more similar to today‘s new arrivals, if they had faced
the present day prices for their skills.66 Race and ethnicity, and not the changing education levels
of the new immigrants, explain much of the change in comparative economic fortunes of recent
immigrants once wage structure changes have been held constant. The point, as also stressed by
LaLonde and Topel (1991), is that recent cohorts of immigrants will look as if they do worse,
even if they have the same set of characteristics as earlier cohorts of immigrants, if the
distribution of wages has become more dispersed and if the new immigrants lie near the lower
tail of the income distribution.
The use of regressions to uncover the wage effects of immigration by regressing
immigrant shares and other controls on wages or relative wages poses many familiar problems.
Among the more prominent concerns with multiple linear regression analysis is the omission of
important right-hand side variables. Biased estimates result if relevant characteristics or controls
are not included in the regression equation. Similarly, how do various characteristics that are
included in a model specification interact with one another? More generally, empirical work
usually forces researchers to assume an appropriate functional form in order to reduce the
problem at hand to one of estimating the parameters of interest. For example, would a linear
function involve a serious mis-specification loss? As the previous section revealed, there is a
wide range of functional forms from which to choose and so the robustness of parameter
estimates is invariably an issue that needs to be confronted.
Variable (mis-)measurement and interpretation also pose problems. For instance, when
does a migrant finally assimilate and become a native? The latter problem is particularly
obvious one in those countries that are essentially composed of older generations of immigrants
(e.g., Australia and the United States).67 More formally, there is the issue of weak separability
(see Berndt and Christensen, 1974) of the various types of labor – not just of skilled versus
unskilled labor, but also of native workers versus immigrant workers as well as first generation
migrants versus second and later generations of migrants.
66
Carrasco, et al. (2008) apply the same methodology to Spanish data, also finding only small effects of
immigration on wages. With similar implications, albeit from a different perspective, Friedberg and Hunt (1995)
note that ―composition problems‖ make it difficult to ascertain the impact of immigration on wage inequality. For
example, they argue that including the newly arrived waves of less-skilled migrants in inequality calculations is
likely to bias the conclusion towards finding greater inequality in the United States.
67
Zimmermann (1995) reminds readers of the literature that the European research on immigration has more to do
with the effects of possessing citizenship. Unlike the U.S. literature, which has tended to focus on the effects of
newly-arrived immigrants on native workers as well as on earlier generations of immigrants, the European data do
not distinguish individuals as foreign-born or not.
~ 37 ~
One of the most important difficulties in the empirical immigration and labor market
effects literature is the likely possibility that labor supply functions are not independent of
wages. The problem is reminiscent of the difficulties faced by the labor economists who
attempted to uncover the effects of trade liberalization on relative wages (see Gaston and Nelson,
2000). Economic commonsense suggests that the immigrant labor force share is endogenous.
To make the endogeneity issue transparent, consider a simple 2-equation model:
wj j X X j j
j w w j R R j j ,
(31)
where X and R are (exogenous) scalars and all variables are expressed in deviations from their
means. As before, j indexes a local labor market. The sign of the OLS bias is given by:
plim
OLS
2
w2
2X
2 2
.
2
X w X 1 w
(32)
It is not possible to argue a priori that the sign of the bias is either positive or negative. For
illustration, supposse 2X 2 0 and that γw > 0 (i.e. higher relative wages are associated with
higher relative supply). If the ―true‖ effect of a higher migrant share of unskilled workers is to
depress unskilled wages, i.e. γλ < 0, then the bias is positive. That is, a failure to account for
endogeneity will bias upward (i.e. toward zero) estimates of the impact of immigrants on wages.
However, note that if we are estimating some variant of equation (31) that, strictly
speaking, our focus is on wage inequality. Furthermore, in many of the early studies in this
literature, λ is simply taken to be the share of migrant labor in market j. Under this
interpretation, it is no longer obvious that γw > 0. Models of immigrant worker self-selection,
based on the pioneering work of Roy (1951), are extremely illuminating here.
Workers with high earnings potential are likely to migrate from a country with an
egalitarian wage structure (where they cannot easily make high earnings), while workers with
low earnings potential are especially likely to migrate from a country with great wage inequality.
In terms of source country characteristics, equality of the income distribution encourages what is
termed ―positive selection bias‖.68 Negative selection bias results when source countries have
unequal income distributions and therefore migrants are likely to be the least skilled.69 Recent
waves to the United States tend to have been increasingly drawn from the latter group (Borjas,
68
In fact, a point often overlooked is that host country labor market conditions are absolutely central to the
migration decision. For example, Hanson and Spilimbergo (1999) found that attempted illegal immigration from
Mexico is extremely sensitive to changes in real wages in Mexico.
69
Interestingly, increasingly negative self selection produces labor market outcomes in both the source and host
countries similar to the picture of the effects of outsourcing on wage inequality painted by Feenstra and Hanson
(Feenstra, 1996; Feenstra and Hanson, 1997). That is, if workers emigrating from Mexico are relatively high skilled
from Mexico‘s viewpoint and unskilled from the United States‘ viewpoint, then wage inequality tends to rise in both
countries.
~ 38 ~
1994a). Immigrants are mobile, but they have tended to cluster in cities where their fellow
countrymen reside. The clustering effects tend to dominate such economic incentives as
differences in unemployment rates or welfare benefits across areas (Bartel, 1989; Bartel and
Koch, 1991). The effects of clustering are borne by the gateway cities, while the geographic
concentration tends to reduce economic progress and the rate of assimilation. Of importance for
the present discussion is that, given that the primary adverse wage impact of new immigrants is
upon previous generations of migrants, the clustering effect may imply γw < 0. If the effect of
clustering is sufficiently strong, then it is possible that OLS estimates are biassed downwards,
and not upwards.70 Friedberg‘s (2001) findings are consistent with this line of argument. She
studies the impact of Russian migration on occupational wages in Israel and finds that IV
estimates are higher than OLS estimates. That is, rather than immigrants choosing occupations
based on them offering higher wages, she finds evidence of occupational immobility (so that γw
< 0). That is, immigrants, irrespective of their skill levels are confined, initially at least, to lowpaying occupations. Hence, OLS estimates overstate the impact of immigrants on wages.
Handling the endogeneity problem is the motivation for the use of the instrumental
variables (IV) approach (e.g. Altonji and Card, 1991; Friedberg, 2001) and the quasiexperimental approach in the labor literature (e.g. Card, 1990; Hunt, 1992). Altonji and Card
(1991) investigate the impact of immigrants on low-skilled native workers. They relate changes
in the earnings and employment of low-skilled natives across cities to changes in the migrant
population. As discussed, the problem is that the immigrant flows are likely to be correlated
with current labor market conditions. Hence, Altonji and Card instrument the change in
immigrants with the size of the immigrant enclave in an earlier period. They argue that the size
of the immigrant enclave in the past is likely to affect immigrant flows but is not necessarily
correlated with current demand shocks. In other words, the IV approach attempts to use only the
variation in immigrant flows associated with variation in enclave ―pull‖ and not that associated
with current demand shocks. Interestingly, Altonji and Card‘s estimate of γλ is one of the most
negative. Notwithstanding, they conclude that immigrants and natives face little competition
from one another. They find that there is some industry displacement from low-wage immigrant
intensive industries; but still, the implied elasticities are small.71 Despite these mobility effects,
the effects on employment and unemployment rates are virtually zero.
Due to the substantial difficulties associated with choosing ―good‖ instruments (see e.g.
Nelson and Startz, 1990; Bound et al., 1995), considerably more weight in this branch of the
literature has been attached to the results of the quasi- or natural experiments. Natural
Friedberg and Hunt (1995) make a related criticism of Goldin‘s (1994) findings. Using data for 1890 to 1923,
Goldin found a significant negative correlation between the percentage of foreign-born residents and wages in U.S.
cities. However, this may be a ‗composition‘ effect, i.e., if immigrants earn lower wages that natives, then even if
immigrants have no effect on native wages, they tend to be clustered into cities with lower average wages.
71
Friedberg and Hunt (1995) note that Altonji and Card‘s ―large and negative‖ estimates imply that a 10 percent
increase in the percentage of foreign-born in a local labor market implies a minuscule 0.86 percent reduction in
wages.
70
~ 39 ~
experiments occur when exogenous variation in independent (explanatory) variables (that
determine ―treatment assignment‖) is created by either abrupt exogenous shocks to labor markets
(Meyer, 1995). For example, natural experiments can arise due to institutional peculiarities (e.g.,
Vietnam-era draft lotteries) or due to exogenous policy changes that affect some groups but not
other groups (e.g., changes in policies in some states but not others).72 In the latter case, Hanson
and Spilimbergo (2001) examine how enforcement of the U.S.-Mexico border is affected by
changes in illegal immigration. They find that the equilibrium level of border enforcement
varies inversely with relative demand shocks (and consequently, demand for undocumented
labor). In other words, the authorities relax border enforcement when the demand for
undocumented workers is high.
Natural experiments are most useful in situations in which econometric estimates are
ordinarily biassed because of endogenous variables due to omitted variables or to sample
selection. The basic approach involves a comparison of changes for ―treatment‖ and ―control‖
groups (i.e., differences-in-differences). This can be accomplished in a components of variance
scheme (time effects, location effects, treatment group effects, interaction terms and so on) or by
using an IV approach in which one instruments for the treatment dummy variable with the
natural experiment indicator variables. In this sense, the IV and natural experimental approaches
are qualitatively equivalent. With IV, legitimate instruments generate a natural experiment that
assigns treatment in a manner independent of the unobserved covariates. The advantage is that
the source of the identifying information is transparent.
To illustrate the basic approach, consider the following example based on Meyer (1995).
Suppose that we have:
w js Ds js ,
(33)
where wjs is the wage in local labor market j (e.g. city). The ―treatment‖ dummy is Ds, which
may be thought of as measuring migration intensity above some critical threshold in market j.
That is, if λj ≥ λ* then Ds = 1, and 0 otherwise. Also, an important assumption is that E(εjs│Ds =
0) = E(εjs│Ds = 1) or E(εjs│Ds) = 0. Equation (33) simply involves comparing wages in cities
that have high migrant populations to those that do not. An unbiased estimate of β is obtained by
differencing, i.e.,
b w1 w0 ,
(34)
where overscores denote group means. Under typical assumptions, α would be consistently
estimated as the group size goes to infinity. Of course, we could also simply estimate α from the
regression equation (33). Note that the researcher needs strong evidence that the two types of
labor markets would have been comparable, but for the arrival of foreign-born residents.
Hamermesh (2000) argues that, unlike ―acts of God‖, treating changes in the legal environment as exogenous is
rarely convincing.
72
~ 40 ~
Occasionally, data are available for the time period before and after a ―treatment‖ (in our
case, the treatment is an immigration shock) for a group that does not receive the treatment but
experiences some or all of the other influences that affect the treatment group. At the very heart
of the quasi-experimental approach to the immigration and labor market literature are the nonpolicy and non-institutional shocks that can be considered truly exogenous to existing labor
market conditions in the destination country (e.g., Baby Boom, Black Death, Mariel Boatlift).
That is, consider:
w jst Ds Dt Dst jst ,
(35)
where Dt can be thought of as a time period dummy, Ds is defined as above, and Dst = 1 if Dt =
Ds = 1, and 0 otherwise. The key idea is that η summarises the way in which both treatment and
non-treatment groups are influenced by time (e.g. such things as macroeconomic conditions and
regional growth trends). The time-invariant difference in overall means between the groups is
captured by β. Dst indicates membership of the experimental group after it receives the treatment
and γ is the true causal effect of the treatment on the outcome for this group. Again, the key
identifying assumption is that E(εjst│Dst) = 0.
Note that γ would be 0 in the absence of the treatment (i.e. the immigration shock). An
unbiased estimate of γ can be obtained by the differences-in-differences estimator, i.e.:
g w11 w01 w10 w00 ,
(36)
where the first subscript is t and the second is for treatment s. Without question, the most cited
natural experimental paper is Card (1990) which examines the impact of the Mariel Boatlift on
Miami‘s labor market. In his paper, the first bracketed term in equation (36) represents the
difference in wages for black workers in Miami before and after the Boatlift.73 The second
bracketed term is the wage difference for the same types of workers in a group of four
comparison cities. The latter cites were chosen because they had relatively large populations of
black and Hispanic workers and because they exhibited patterns of economic growth similar to
those observed in Miami over the late 1970s and early 1980s. As is well known, despite the
dramatic and sudden 7 percent increase in the size of Miami‘s work force, Card is unable to
detect any adverse impact on the wages or unemployment of less-skilled workers.74
There are two notable quasi-experimental studies for Europe. Hunt (1992) examines the
impact on wage differentials in France in 1968 of the influx of pied noirs from Algeria during
the early 1960s; and Carrington and de Lima (1996) study the return of Portuguese colonialists
73
Card conducts a similar analysis for Hispanic workers, as well. Also, in addition to wages he uses the same
methodology to examine whether the Boatlift had any effect on the unemployment rates of less-skilled workers.
74
This is an interesting and important finding, but Card‘s analysis does not tell us how the labor shock was
absorbed. Interestingly, there is little support for Rybczynski effects (Lewis, 2008). Later work has suggested that
demand effects (Saiz, 2003; Bodvarsson et al., 2008) and/or technological response (Lewis, 2008) may help.
~ 41 ~
from Africa and examine the wage effects across the provinces of Portugal. Consistent with
Card‘s findings, these authors were unable to discern adverse wage effects for native workers.
Recently, Lemnos and Portes (2008) use the labor market shock associated with the Eastern
Enlargement of the EU to examine the effects on local labor markets, finding little evidence of
wage effects. Similarly, Glitz (2006) uses the large migration associated with reunification of
Germany to examine the labor market effects of migration. While he finds no evidence of wage
effects, he does find that immigration increases unemployment. This is consistent with other
findings, using different methods, that immigration in the context of labor market inflexibility
can result in unemployment (e.g. Angrist and Kugler, 2003; D'Amuri et al., 2010). Finally, a
pair of recent papers have used unexpected immigration shocks due to major hurricanes to
examine the effect of migration shocks on local labor markets (Kugler and Yuksel, 2008;
McIntosh, 2008). Both find statistically significant, but modest, effects of these shocks.
Although subject to varying interpretations, the finding of small local labor market
effects has been remarkably robust and in line with the findings from the econometric studies.
LaLonde and Topel (1991) estimate the elasticities of complementarity between immigrants and
natives and between new immigrants and older cohorts of immigrants and find both to be very
small. Taken in conjunction with their analysis of wages and earnings changes in local labor
markets, they conclude that the wage effects of immigration are ―quantitatively unimportant‖.
Based on studies currently in print at the time that we are writing this paper, it appears to us, that
such a conclusion is inevitable.
One would expect that in the face of such a huge mountain of evidence that this would be
the end of the story. Of course, even the briefest excursion through the recent literature reveals
that the debate is far from having run its course. The attention of those intent on identifying
large native labor market impacts of immigration has turned to explaining what the small
statistical effect ―really means‖. One potential problem is the possibility that immigrants locate
to areas where jobs are expanding anyway.75 Given the continuing significance of a small
number of immigrant gateway cities (consistent with the major role played by networks in
channeling immigration), it is not surprising that there is little evidence supporting this
conjecture (Bartel, 1989; Bartel and Koch, 1991; Frey and Liaw, 1998; Gurak and Kritz, 2000).
A potentially more serious problem is that the internal migration by natives offsets the increased
supply of immigrants (Filer, 1992; Borjas, 1994a; Frey, 1995; Borjas, Freeman and Katz, 1997;
Frey and Liaw, 1998; Hatton and Tani, 2005). Consider the case of the Mariel boatlift: natives
that were considering moving to Miami might now foresee lower wages as a result of the
increased labor force (or even decide to avoid Miami for racist or other social reasons); they will
now try to identify a similar city as their new migration target; but those cities are likely to be
75
Once again, the issue is the econometric one of handling the possibility of endogeneity. If immigrants choose
their destination locations or occupations based on wage growth and the growth of job opportunities, rather on wage
levels, then controlling for the endogeneity problem appropriately requires the use of panel data.
~ 42 ~
precisely the cities used by Card as ideal untreated units (i.e. similar on all dimensions to Miami,
but not receiving the immigrant shock). The new native immigrants to those cities will have a
similar effect on the labor markets there to the effect of the Marielitos on the Miami labor
market, thus biasing the analysis toward a finding of no effect. David Card (2001; See also Kritz
and Gurak, 2001) examined precisely this effect and found that the inter-city migration decisions
of natives and older immigrants are largely unaffected by inflows of new immigrants. Moreover,
Card and DiNardo (2000) find no evidence of selective out-migration by natives in response to
immigrant inflows at particular locations.76 However, Borjas (2006) responded to this challenge
by developing a simple model illustrating the causal connection between migration and wages,
which also provides a framework for structuring his empirical work. Using census data from
1960-2000, Borjas presents evidence consistent with a large effect of foreign migration on
internal migration, and of the internal migration on estimates of the wage effect of foreign
migration. In response, Peri and Sparber (2008) show that Borjas‘ results are an artifact of the
way the variables are constructed for the analysis, while Peri (2007) extended Borjas‘
methodology for a focus on immigration to California—finding no native migration response,
imperfect substitutability of migrants for natives and an average wage gain for native workers.
Finally, while Cortes (2008) finds evidence of some offsetting native migration in her study of
the effect of immigration on prices of non-traded goods and services in local markets, she
concludes that this effect is not sufficient to arbitrage away the effect of migrants on prices.
Furthermore, it remains a puzzle that regional economies should adjust so quickly to immigrant
shocks, but so slowly to most other shocks studied by regional and labor economists. At this
point, there is sufficient evidence on both sides of this question that one would have to have very
tight priors indeed to assert a clear opinion one way or the other on this question.
One possibility, suggested by factor-price insensitivity, is that adjustment occurs on the
output margin rather than on the wage margin. That is, the composition of output may change in
response to an endowment shock, in such a way that factor-prices are unchanged. The evidence
on this is mixed: as we discuss in the next section, there is evidence of the sorts of Rybczynski
effects needed to support this adjustment mechanism, as well as some (weak) direct evidence
directly related to immigration shocks. Specifically, Hanson and Slaughter (2002) document the
rapid growth in apparel, textiles, food products and other labor-intensive industries in California
after the arrival of Mexican migrants. They focus on state-specific endowment shocks and statespecific wage responses. They show that the state output-mix changes broadly match state
endowment changes and that variation in state unit factor requirements is consistent with factor
price equalisation across states. States absorb regional endowment shocks through mechanisms
other than changes in regional relative factor price changes. This is consistent with the findings
of Blanchard and Katz (1992) which indicate that wages and income per capita converge for
American states. However, Blanchard and Katz also find that employment performance
76
Earlier studies also found no evidence of such effects in the US (Wright et al., 1997) and Germany (Pischke and
Velling, 1997).
~ 43 ~
diverges, i.e., shocks to employment grow and persist.77 Overall, this is consistent with the view
that small local labor market effects may be consistent with somewhat larger aggregate labor
market effects. Other work suggests that technological change, either exogenous (Gandal et al.,
2004) or endogenous (Lewis, 2005; Card and Lewis, 2007; Lewis, 2008), is a more likely
candidate than Rybczynski effects.
The broad conclusion from the first large NBER project on immigration and trade was
that immigration had a relatively smaller area impact than increased import penetration on native
labor. Overall, the labor market was thought to easily adjust to migrant inflows, absorbing
immigrants with little redistributive losses to natives (see Abowd and Freeman, 1991). This
conclusion was largely, and somewhat surprisingly, reversed by the second NBER project
(Borjas and Freeman, 1992). While the wage and employment effects for natives in local labor
markets are small, it was argued that certain groups of workers have been adversely affected by
immigration. The augmented factor supplies of less-skilled workers, due to either the effect of
trade with low-income countries or from the immigration of workers from developing countries,
were thought to have contributed to the poor outcomes of less-educated American workers
during the 1980s and early 1990s.
The finding that certain groups of workers may have been adversely affected by
immigration is evident for some European studies as well. For example, Hofer and Huber (2003)
find that immigration reduces wage growth and increases risk of unemployment in Austria.
Similarly, De New and Zimmermann (1994) find that greater concentrations of foreign workers
in German industries during the 1980s were associated with small wage gains for white-collar
workers, but relatively large wage losses for blue-collar workers.78 Zimmermann (1995)
attributes these findings to the greater labor market inflexibility, greater levels of unionization
and low labor mobility in Europe in comparison to the United States.79 In the case of strong
unions or wage inflexibility, the expectation is that immigration is associated with increases in
native unemployment. In the case of labor immobility, equations (8) and (9) suggest that skilled
wages increase and unskilled wages decrease when unskilled immigration increases. Similarly,
77
Decressin and Fatás (1995) have similar findings for the regions of Europe. However, they show that changes in
labor force participation rates bear proportionately more of the burden of adjustment in response to labor market
disturbances
78
Specifically, De New and Zimmermann find that their IV estimates were substantially more negative than their
OLS estimates (in fact, 15 times larger). On one hand, this result may be seen as being consistent with Friedberg‘s
(2001) occupational crowding finding for Israel, discussed above. On the other hand, at a more practical level there
is evidence of some instability in the coefficients of the industry level variables in the IV model specification. De
New and Zimmermann use industry dummies, industry growth rates and industry specific time trends as
determinants of share of foreign workers by industry.) As the authors acknowledge, the issue of whether their
instrumenting procedure has been able to fully control for the endogeneity of the foreign share of labor may have
been insufficient.
79
Interestingly, Zimmermann (1995) notes that there has been little impact of immigration on unemployment rates
for Germany (see also Winkelmann and Zimmermann, 1993; Pischke and Velling, 1997; Winter-Ebmer and
Zweimüller, 1999a). Similar null results on immigration and unemployment have been found for Austria (WinterEbmer and Zweimüller, 1999a; b), Italy (Venturini and Villosio, 2006), Portugal (Carrington and deLima, 1996), the
UK (Angrist and Kugler, 2003) and Australia Junankar et al. (1998).
~ 44 ~
Angrist and Kugler (Angrist and Kugler, 2003), while finding generally small effects for a
sample of European countries, also find that labor market institutions can play a role in
magnifying such effects.
It should, however, be noted that the results for Europe, and other countries, are quite
mixed. For instance, Pischke and Velling (1997) find that immigration had no adverse wage or
unemployment effects in German local labor markets. Similarly, Winter-Ebmer and Zweimüller
(1996; 1999a) using both OLS and IV estimation procedures find no detrimental immigration
impact upon Austrian industry or regional wages. These methods have also yielded minimal
wage effects for such countries as Italy (Gavosto et al., 1999), France (Jayet et al., 2001),
Australia (Addison and Worswick, 2002), the United Kingdom (Dustmann et al., 2005), and the
Netherlands, the UK and Norway (Zorlu and Hartog, 2005). In addition, we have already noted
the small effects found using natural experiment methods for France (Hunt, 1992) and Portugal
(Carrington and deLima, 1996). Taking all of the results using cross-sectional data together,
whether based on production function or regression methods, the overwhelming conclusion is
that immigration has, at most, small negative effects on wages and no effects at all on
unemployment (see the meta-analytic study by Longhi et al., 2005).
3.1.3. ―Factor Proportions‖, Skill-Cells and National Data
The approaches we have considered to this point, both production function and regression based,
primarily identify labor market effects from variance across regions. We have just noted that
internal migration of natives, and even of earlier waves of migrants, could interfere with
inference in analyses based on local labor market data. As a response to this potential problem,
Borjas has argued that analysis of the effect of migration on labor markets should proceed at the
level of the national economy (Borjas, Freeman and Katz, 1992; 1997; Borjas, 2003; 2006).
A first approach to this problem was taken by Borjas, Freeman and Katz (BFK 1992; 1997). The
idea here was to use a standard, partial equilibrium framework to calculate the effect of a fixed
increase in inelastically supplied labor implied by empirical immigration. Specifically, BFK
follow Katz and Murphy (1992) in focusing on the effect of a change in the supply of one factor
relative to another on the relative wages of those factors. Factors are taken to be inelastically
supplied while the relative demand for labor is smoothly downward sloping. If every factor i‘s
supply is made up of a domestic component and an immigrant component (i.e. zi = Ni + Mi), and
if we let the ratio of domestic to immigrant labor be mi = Ni/Mi we can rewrite the aggregate
supply of factor i as zi = Ni(1 + mi). Then, using a framework like that in (25)-(29), with all labor
aggregated into either skilled (S) or unskilled (U), one can calculate the effect of a change in
relative supplies on relative wages as:
1 mS
w
1
ln L
ln
.
SL
wS
1 mU
~ 45 ~
(37)
where the change is taken between fixed dates.80 BFK also follow Katz and Murphy in
constructing two pairs of aggregate labor terms: {high school dropouts, high school grads}and
{high school equivalent, college equivalent}, and apply the Katz/Murphy estimates of ζSL to
make the calculations of the effect of immigration on relative wages.81 BFK conclude that the
immigration-induced change in the relative supply of high school dropouts accounted for about
44% of the total decline in their relative wage.
The work in this method goes mostly into constructing the aggregates. As equation (37)
suggests, the actual calculation is quite simple. However, this is also the problem with this
method. As DiNardo notes in his comment on BFK:
As to the aggregate proportions approach, I am reluctant to conclude that it provides a more reliable [than
spatial correlation] way of predicting the impact of immigration on relative wages. The authors' simulations are
based on the assumption that the principal mechanism by which immigration affects wages is shifting labor
supply along a demand curve. Maybe this is correct; however, the approach provides no independent testable
pre- dictions. It can only be confirmed by the extent to which it is in accord with a priori beliefs about the size
and directions of the effects. (DiNardo, 1997, pg. 75)
In addition, by focusing on a one sector model, all adjustment to immigration is forced through
the wage margin. As our discussion of the relevant general equilibrium theory suggests, this
virtually guarantees overestimates of wage effects. Thus, it is probably not surprising that the
impact of these papers was short lived.
Responding to DiNardo‘s critique, while retaining the national-level empirical focus, involves
finding an alternative to regions as a source of variation as a basis for estimating effects. One
alternative that has been applied in other branches of empirical labor economics is to exploit
variance across similar, but imperfectly substitutable, cohorts of workers (Freeman, 1976; 1979;
Welch, 1979; Katz and Murphy, 1992; Card and Lemieux, 2001). The key to identifying the
effect of immigrants on wages is the assumption that the individuals in the ―skill cells‖ are
perfect substitutes for one another, but are imperfect substitutes across cells. In this case, is
seems perfectly plausible to assume that individuals cannot switch cells in response to
differentials in wages. As with research based on spatial correlations, there are both regressionbased and production function-based variants on the skill cell approach. The standard reference
for both of these is Borjas (2003; see also Borjas and Katz, 2007).
The first step in applying this approach is to construct the skill cells. Since the goal is to exploit
variance in immigrant presence across skill cells to identify the effect of immigration on wages,
In addition to the BFK papers, and Borjas‘ (1999a, pp. 1751-1759) survey, detailed discussions of this method can
be found in Johnson (1980; 1998).
81
It is interesting to note that BFK were interested in evaluating the effects of both trade and immigration on relative
wages. Their estimate of the effect of trade on labor supply applied input-output methods to identify the implicit
imports and exports of labor via trade. At the time, immigration had not generally been considered in the set of
major factors taken to explain the rapid rise of the skill premium in the 1980s (i.e. technological change, trade, shifts
in product demand, and erosion of institutions supporting higher wages (e.g. unions and minimum wages). As a
result, BFKs conclusion that immigration played a major role in accounting for the change in the skill premium was
all the more striking.
80
~ 46 ~
the key here is to aggregate up from individual data to skill cells such that individuals in a given
cell are perfect substitutes for one another and individuals in difference cells are imperfect
substitutes. Borjas aggregates on age cohort (―experience‖) and education. That is, Borjas
assumes that workers (whether native or immigrant) with the same level of schooling and
experience are perfect substitutes, but that workers with the same level of schooling, but different
experience are imperfect substitutes (similarly for same experience but different schooling). For
this strategy to work, we must be confident that the definitions of the cells are such that workers
in different cells really are imperfect substitutes and that workers in the same cell really are
perfect substitutes.82 For his analysis, Borjas works with four education groups i {high school
dropouts, high school grads, some college, college grads} and 8 labor market experience groups j
{5 year bands for workers with 1-40 years of experience}—for a total of 32 age/experience
cells. Since he uses data from five US censuses t = {1960, 1970, 1980, 1990, 2000}, this gives
Borjas a dataset of 160 ijt observations on male workers.
For each of these cells, he calculates the share of immigrants in total (male) workers in a given
cell: pijt M ijt / zijt . Using these data, Borjas estimates the following reduced form regression:
ijt
pijt si x j t si x j si t x j t ijt ,
(38)
Both of these turn out to be tricky. Borjas (2003, pp. 1344-1347) provides evidence that ―(for given education)
immigrants and natives with similar levels of experience are closer substitutes than immigrants and natives who
differ in experience‖ (pg 1344). However, Card (2009, section III B) argues that ―workers with less than a high
school education are perfect substitutes for those with a high school education‖ (pg. 2, our emphasis). Given that
Borjas treats these as two, of four, distinct categories, if Card is correct this implies a serious misspecification on the
part of Borjas. Ottaviano and Peri (2008) provide evidence that this is, in fact, the case.
The issue of whether or not immigrants and natives are perfect substitutes is considerably more fraught, and a
matter of ongoing dispute in this literature. The argument for treating any worker with the same labor marketrelevant attributes (i.e. education and experience) as identical to any other worker is strong on a priori grounds.
Anti-discrimination law even tries to mandate this as an outcome when gender or race is the discriminating factor.
Not surprisingly, aggregating workers (characterized by many forms of heterogeneity) into age/experience cells is a
standard approach in labor economics (e.g. Katz and Murphy, 1992; Card and Lemieux, 2001). This has certainly
been a common strategy in research on the labor market effects of immigration in virtually every sort of method:
factor proportions (Borjas, Freeman and Katz, 1992; 1997), production function (Gang and Rivera-Batiz, 1994;
Suen, 2000), regression analysis of local labor markets (Card, 2001; 2005), and, of course, the regression analysis of
skill cells in national labor markets (Borjas, 2003; 2006). In addition, Cortes (2008) finds evidence of imperfect
substitutability in her study of the effect of immigration on prices of final goods in local markets. Note from this list
that, given the range of outcomes reported in these papers, that the perfect substitutes assumption alone cannot
account for findings of large or small effects. Nonetheless, it is also the case that production function-based studies
consistently find that immigrants and natives are imperfect substitutes. While most of these studies consider only
aggregate factors {domestic labor, immigrant labor}, Greenwood, Hunt and Kohli (1997) do consider an input
vector that distinguishes both native/immigrant and skill level distinctions. The result is the same: immigrants are
not found to be perfect substitutes for native workers. In addition to the classic paper by Chiswick, Chiswick and
Miller (1985), which develops in detail reasons we might expect immigrants and natives to be imperfect substitutes,
a recent paper by Peri and Sparber (2009) develops an interesting model of task specialization and careful empirical
analysis supporting the same presumption in favor of imperfect substitutability. Given that Ottaviano and Peri
(Ottaviano and Peri, 2006; Peri, 2007; Ottaviano and Peri, 2008) have made this a central element of their critique of
his empirical results, it is not surprising that Borjas (Borjas et al., 2008) has responded strongly on just this issue.
82
~ 47 ~
where ijt denotes a labor market outcome (log annual earnings, log weekly earnings, fraction of
time worked), si, xj, and πt are education, experience and time fixed effects. This structure
involves indentifying the effects of immigration from variance within education/experience cells
over time. Using the estimate of ζijt, Borjas calculates the elasticity of the wage wrt to the ratio
ln wijt
. For his basic specification,
of immigrants to natives in a given cell as:
2
mijt
1 mijt
Borjas calculates this elasticity to be -0.40—i.e. an increase of immigrants in cell ijt by 10% is
estimated to cause a 4% fall in weekly earnings. The effect on annual earnings is estimated to be
-6.4% and on labor supply -3.7%. As Borjas notes, these estimates are on the high side of
previous estimates found in non-immigration studies (Juhn et al., 1991), and much higher than in
other immigration studies.
In addition to this reduced form approach, Borjas also considers a more structural approach
based on estimation of a production functions defined on labor defined in skill/experience terms.
Unlike the production function approach based on spatial variation and a limited set of labor
types (often just {native, immigrant} or native/immigrant crossed with racial categories), Borjas
has a large number of schooling/experience types and a relatively small number of annual
observations, so he requires a technology that has a relatively small number of parameters that
must be estimated. For this purpose, he uses a nested CES function.83 Specifically, Borjas
assumes a top-level aggregator that produces GDP as a function of capital and labor
Yt Kt Kt Lt Lt
1
,
KL 1
1, Kt Lt 1.
KL
(39)
83
The basic approach applied in this work is to assume a nested CES structure (Sato, 1967; Bowles, 1970; Chung,
1994 Chapter 11). This involves a top-level aggregator that gives output at time t as:
1
Yt f z t it zit ,
iI
where the δit > 0 are technical efficiency parameters; ρ is a parameter related to the elasticity of substitution between
aggregate factors, ζ, as ρ = (1 – ζ)/ζ and -∞ < ρ < 1. However, unlike the standard CES function, the nested CES
function nests some lower level aggregates:
1
zit lti zlti ,
lSi
where Si is the set of types of input i, and α is related to the constant elasticity of substitution between these types, δ,
as above. For example, in labor applications i might denote an education category (e.g. high school dropouts) and
the elements of Si might be experience (proxied by age category). As we shall see, there is no need to stop at two
levels. A general treatment of multiply nested CES functions is given in Perroni and Rutherford (1995).
~ 48 ~
Aggregate labor at time t (Lt) is itself a CES aggregate of workers with varying schooling and
labor market experience. This is constructed by first aggregating workers with the differing
experience, but the same level of education into an education-based aggregate (Lit); and then
aggregating those lower level aggregates across education groups into aggregate labor (Lt).
Thus, the input to the top-level aggregator is:
1
1
Lt it Lit , E
1, it 1,
E
iI
iI
(40)
where ζE is the elasticity of substitution between the education aggregates. The lowest level
aggregator aggregates workers with different levels of experience into iso-education level
aggregates:
Lit ij Lijt
jJ
1
,
X 1
1, ij 1,
X
jJ
(41)
where ζX is the elasticity of substitution between experience classes within an education group.
Using the condition that the wage equals the marginal product for skill group ijt (taking the sole
good, GDP, as numeraire so value marginal product is equal to marginal product), Borjas solves
for the wage as:
ln wijt ln Lt 1 ln Yt ln Lt
ln it ln Lit
(42)
ln ij 1 Lijt .
Borjas follows Card and Lemieux (2001) in estimating the elasticities using fixed effects
regressions to recover the relevant elasticities. Thus, to recover ζX, Borjas estimates:
ln wijt t it ij
1
ln Lijt ,
X
(43)
where the first line of the RHS of equation (42) is represented by the time fixed effect (δt), the
second line is represented by an interaction between the education and time fixed effects, and δij
= ln αij is an interaction between education and experience fixed effects. From equation (41) we
can use the estimates of αij and ζX to calculate the Lit. Next, from the second level of the
production function, for the average wage paid to a worker in education group i at time t, we
estimate:
ln wit t ln it
~ 49 ~
1
ln Lit .
E
(44)
Borjas uses education group-specific time trends to approximate the ζit and the number of
immigrants in each skill group as an instrument for the size of each skill group. Borjas then
applies the same methods as those applied in analyzing production functions using regional data
(see section 3.1.1) to simulate the effects of immigration shocks on wages. Using this
framework, Borjas calculates that US immigration in the 1980s and 1990s resulted in a 9%
reduction in the wages of high school dropouts and a 4.9% reduction in the wages of college
graduates. These are the two education categories with the highest shares of immigrants. For
high school graduates wages fell by 2.6% and workers with some college were only minimally
affected.
Borjas‘ (2003) estimates of the effect of immigration are the largest not associated with an
explicitly adversary purpose. There have been a number of applications of the methods from this
paper, and none have produced estimates of equivalent magnitude. 84 The most explicitly critical
work is contained in a pair of papers by Ottaviano and Peri (OP, 2006; 2008).85 The core of
OP‘s criticism is an argument that three of Borjas‘ simplifying assumptions—high school
dropouts and high school grads are imperfect substitutes, natives and migrants are perfect
substitutes, and capital is a fixed endowment—end up biasing his results toward finding larger
negative effects of immigration. OP work with the structural approach developed in Borjas, but
they extend the approach to embed, and test for, two versus four skill groups and perfect versus
imperfect substitutability of immigrants and native. To deal with the potential perfect
substitutability between types of skilled and types of unskilled labor, instead of equation (40),
OP consider an aggregate of two types of labor--LH (skilled) and LL (unskilled):
84
In addition to the papers by Ottaviano and Peri (2006; 2008) that we discuss here, other papers include, Suen
(2000), Manacorda, Manning and Wadsworth (2006), Peri (Peri and Sparber, 2008; Peri, 2009), D‘Amuri, Ottaviano
and Peri (2010), Felbermayr, Geis and Kohler (2010), and Raphael and Smolensky (2009a; b) all of which adopt
structural approaches based on nested CES production functions of differentiated labor, while Bonin (2005) and
Cohen-Goldner and Paserman (2004) pursue the econometric approach. These papers work with data from Hong
Kong, the UK, California, Germany, Germany, the US, Germany, and Israel, respectively. All of these papers find
negative effects of immigration on the lowest education cell, but none find that these effects are large. Another
group of papers apply the same method of working at the national level on skill cells, but define those cells in terms
of occupation rather than education. As with education/experience, the idea here is that people are not able to
change occupation readily in response to shocks. This permits identification of the labor market effects of
immigration if immigrants are distributed unevenly across occupations and over time. Camarota (1997) and Card
(2001) both focus on occupation, but identify effects from variance across regions in a single year. Friedberg (2001)
looks at the unexpected shock to the Israeli labor market of Russian immigrants 1990-1994 identifying effects from
occupation level data (using Russian occupations as an instrument) and finds essentially no effect on Israeli wages.
Orrenius and Zavodny (2007) use data on occupation and region over time to estimate the effects of immigration
and find statistically significant, but small effects. It should be noted that Borjas has produced other papers showing
essentially perfect substitutability and large effects (Aydemir and Borjas, 2007; Borjas et al., 2009).
85
The key paper here is OP (2008). OP (2006), which emphasized imperfect substitutability between natives and
migrants and capital adjustment, whose results were criticized by Borjas, Grogger and Hanson (2008) for sensitivity
to the way they constructed their four schooling aggregates. In response, OP (2008) show: first, that the problem is
less the construction of the variables than the use of so many dummy variables that results in insignificant results;
and, second, argue that the four education groups should be tested against the more standard two groups applied in
empirical labor economics outside the economics of immigration. Thus, while the results of this paper seem
unlikely to be the last word on this topic, at this point it does seem to be fair to conclude that the Borjas (2003)
results will continue to be seen as extreme.
~ 50 ~
1
1
Lt H LHt L LLt , HL
1, it 1,
HL
iI
(45)
where ζHL is the elasticity of substitution between high and low skilled labor and each of the Lit (i
{H,L}) is itself an aggregate of two sub-types: LHt is a CES aggregate of college dropouts and
college grads; and LLt a CES aggregate of high school dropouts and high school grads. This
specification nests the four skill-group structure (i.e. equation (40)) and can be used to test the
Borjas specification against the more standard specification. To deal with the assumption that
migrants and natives might be imperfect substitutes, they develop a fourth aggregate that
produces the Lijt that are the inputs of equation (41) from home and native workers with
education level i and experience level j in time t:
Lijt Hijt H ijt Fijt Fijt
1
,
1
1, Hijt Fijt 1,
(46)
where ζκ is the elasticity of substitution between home and foreign born labor. Finally, OP
introduce an explicit model of sluggish capital adjustment rooted in earlier work in empirical
work on economic growth. The empirical implementation results in two broad results: first,
while high school dropouts/high school grads and college dropouts/college grads are very good
(essentially perfect) substitutes for one another, their aggregates are very imperfect substitutes;
and second, immigrants and natives are imperfect substitutes for one another. That is, OP
produce strong evidence that a model using two education groups and distinguishing between
natives and immigrants dominates the Borjas model. In addition, OP develop a framework in
which, assuming international capital mobility or capital accumulation, capital adjusts to
immigration shocks to maintain a constant real return to capital and a constant capital-output
ratio. Under these two adjustments to Borjas‘ structural model, OP calculate that immigration
has had a small negative effect on high school dropouts, positive effects on other groups and a
positive aggregate effect on the average wage of US workers overall.86
Overall, then, the broad conclusion from all four approaches—regional v. skill based
observations by structural v. reduced form methods—to estimating/calculating the effect of
immigrants on native labor market performance come to the same conclusion: at worst,
immigration has small negative effects on native wages and employment prospects, with the
largest negative effects falling on previous waves of immigrants with the same labor market
traits. There is some evidence that, consistent with a loose interpretation of Samuelson‘s
LeChatelier principle, the negative effects are more severe in the short-than in the long-run. For
an area of research that is often seen as riven by deep debates between rival schools, this level of
overall agreement seems surprising.
86
Peri (2007) refines the OP approach by developing a creative instrumental variable approach to the estimation of
the relevant elasticities—i.e. he uses immigration by skill in the rest of the US as an instrument for the supply driven
part of immigration to California—and applies it to California. The results are consistent with those in OP.
~ 51 ~
3.2. Empirical links between endowment changes and output changes
As with the previous sub-section, the most direct approach to evaluating the Rybczynski theorem
is a small group of papers that directly exploits the model structure, extending the production
theoretic approach to the simultaneous existence of trade in goods and factors. Following
original work by Burgess (1974), empirical trade economists have exploited duality theory to
estimate comparative static effects of trade by treating trade as a direct argument in a GNP
function.87 The marriage of this approach to trade modeling to the production theoretic modeling
of immigration seems obvious, but has only rarely been done. As we noted above, Kohli (1993;
1999; 2002) develops this sort of analysis in considerable detail. With particular reference to the
Rybczynski relations, using Swiss data, most of Kohli‘s work analyzes a single output economy
and can‘t really speak to Rybczynski effect. However, the economy in Kohli (2002) has two
final outputs (exports and domestically consumed goods), and here there is evidence that
immigration is associated with increased production of the domestic good, but not the
exportable. Hijzen and Wright (2010) explicitly evaluate Rybczynski effects in a production
theoretic framework with two final outputs (high and low skill-intensive) and 6 factors (high and
low skilled domestic and foreign workers, capital and imports) for UK data from 1975-1996.88
Loosely consistent with the Rybczynski theorem, Hijzen and Wright find a (small) positive effect
of immigration on output quantities. Taken together with evidence of a (small) negative effect
on own wages, it seems sensible to interpret the overall results as suggesting that economies
adjust to an immigration shock on both the wage and output margins.
Additional evidence on Rybczynski-like effects in a trade theoretic mode is found in the
literature (often seeking to ―test‖ HO theory) examining the empirical link between endowments
and production structures.89 The most straightforward approach exploits the fact that, under
HOV assumptions (in particular, common, constant returns to scale technologies and costless
trade) and assuming m = n, there is a linear relationship between outputs and endowments. From
the full employment conditions in 1, and letting A-1 ≡ B = [bji], we can write:
y kj b ji zik ,
(47)
iI
where k denotes a country. This expression can be used as the basis for empirical evaluation of
the ―Rybczynski‖ relations. A widely cited paper exploiting this approach is Harrigan (1995)
87
The underlying idea is to treat trade as an input to final GNP under the argument that virtually all goods in trade
must be processed further for final sale. See Kohli (1991) for an excellent development of the theory, econometrics,
and results from this research.
88
While the Rybczynski elasticities‖ are perfectly well-defined in this analysis, the 6 = m > n = 2 structure renders
their interpretation in terms of the Rybczynski theorem is problematic. The same stricture applies as well to the
interpretation of the results in Kohli (2002).
89
Two survey papers are particularly worth consulting on the issues we briefly discuss in this paragraph: Maskus
(1991), in addition to presenting original results we discuss below, provides an excellent discussion of data issues
that arise in research on factor content models of trade; and Harrigan (2002, section 3) provides detailed discussion
of theoretical and methodological issues in evaluating the link between endowments and output.
~ 52 ~
constructs an analysis with 4 factors (capital, skilled and unskilled labor, and land) and 10
manufacturing sectors. Harrigan finds a statistically significant relationship between
endowments and outputs, but also finds large within sample prediction error. Ultimately he
concludes (pg. 41) that ―there is more to the international location of production than can be
explained by the free trade/factor proportions model used here‖. Kim (1999) applies this same
method (with 7 inputs and 20 manufacturing sectors) to the case of US states for the years 1880,
1900, 1967, and 1987. This analysis found regional endowments explaining a large share of
regional differences in output patterns. For Kim, the alternative was local spillovers and
agglomeration, for which he found little evidence. Several papers using this approach are
specifically concerned with the possibility of technological differences between countries.
Dollar, Wolff and Baumol (1988), Maskus (1991) and Davis and Weinstein (2001, section III A)
apply this method to data sets with two inputs (K and L) and many sectors (13 in DWB, 28 in
Maskus, and 34 in Davis and Weinstein). Endowments play a major role, but, contrary to the
standard model, technology differences between countries appear to be significant (and quite
large). In work explicitly focused on both Rybczynski effects and technological difference,
Harrigan (1997) estimates a translog GDP function with 7 manufacturing sectors and 6 factors
(arable land, 2 types of capital, and 3 types of labor), for 10 industrial countries over the years
1970-1988. Importantly, technology in sectors is permitted to vary across countries and time in
Hicks neutral fashion. The results are consistent with significant effects of endowments on
sectoral outputs. Redding and Vera-Martin (2006) apply a similar method to the analysis of
European regions, again finding evidence that endowments help predict to production structure.
The work discussed in the previous paragraph interprets technological difference as a function of
differing degrees of technological progress across countries (and, possibly, sectors). An
alternative, and complementary, approach sees technological difference as a function of selecting
technologies from common sets (i.e. isoquants) in the face of differing prices. Thus, where the
work discussed in the previous paragraph presumes (and seeks to test for) factor-price
equalization, the work considered in this paragraph permits factor-prices to differ across
countries. That is, there may be multiple cones of diversification. An early effort to indentify
production structure in the context of multiple cones is Brecher and Choudhri (1993). The
authors develop a number of tests, applied to production data for the US and Canada, seeking to
identify the presence and sources of non-factor price equalization. The conclusion of this
analysis is that endowment differences matter in accounting for production structure, but that
account must be taken of interindustry differences in factor prices seen as a function of imperfect
factor mobility. Schott (2003) marks a substantial advance in its attempt to develop direct tests
of multi-cone production that might be obscured by aggregation of different industries within
standard industrial classifications. In this paper, Schott first demonstrates that 3-digit industrial
aggregates almost surely contain industries that are heterogeneous in inputs, then constructs
aggregates of industries that may be more heterogeneous for specific countries, and then
estimates a model with multiple cones. While there are some problems in both the construction
of the industry aggregates and interpretation of the results (Harrigan, 2002, pp. 97-99), Schott is
~ 53 ~
quite convincing that specialization of production structures in distinct cones plays an important
role in accounting for patterns of production.90
Related to this work, and explicitly about immigration, is a pair of important papers by Hanson
and Slaughter (2002) and Gandal, Hanson, and Slaughter (2004), the first dealing with the US
the second with Israel. These papers are based on a clever accounting decomposition that seeks
to identify the contributions of output-mix change and technological change in adjusting to
endowment shocks.91 In the US case, Hanson and Slaughter present results consistent with
productivity-adjusted factor-price equalization across states and, further, present evidence
suggesting that states have absorbed changes in labor endowments primarily via skill-biased
technological change which is common across all states and, secondarily, via changes in output
mix. That there should be evidence of output-mix adjustment in a period of rapid and substantial
technological change strikes us as important. However, such evidence does not exist in the Israel
case, where Gandal, Hanson, and Slaughter find that global changes in technology were (more
than) sufficient to absorb the huge, relatively skilled influx of immigrants from Russia. In
addition to the finding that output-mix adjustment was playing a role, there are two important
implications of this work for the discussion to follow. First, there is some suggestion that, at
least among relatively developed economies, the assumption of a common technology across
countries may be less of a distortion that assuming a common technology across a finite period
of time (at least during a technologically dynamic period). Second, while appropriately
constructed comparative static analysis will identify important forces operating at the level of the
economy as a whole, dynamic forces that are not incorporated in the analysis might well
overwhelm the static forces.92 On the other hand, since these forces are both less well
understood and less controllable, their relevance for policy analysis is very unclear.
We offer the following quotation from as a summary of the work discussed in this section: ―The
study does not provide evidence that the Heckscher-Ohlin-Vanek framework can be blithely and
blindly applied to international data. However, it does validate the use of the underlying general
equilibrium structure as an excellent description of national data‖ (Davis, Weinstein, Bradford
and Shimpo, 1997, pg. 422). This is certainly good news, since for the purposes of evaluating
the effect of immigration, it is the national effects that are relevant. Thus, to repeat the claim
90
For other empirical work on multi-cone models, see: Leamer (1987) and Xiang (2007). An unpublished paper by
Harrigan and Zakrajšek (2000) using an extension of the methods from Harrigan (1997), does not find evidence
supporting multiple cones. On the subject of the endowment-output link, and the ways results vary in moving from
inter-regional to international environments, see: Davis, Weinstein, Bradford, and Shimpo (1997); Davis and
Weinstein (1999); and Bernstein and Weinstein (2002). One of the key results in the work of Davis, et al. and
Bernstein and Weinstein is that the HOV production model performs quite well once one accounts for the
indeterminacy that results from m < n, and non-factor price equalization.
91
Lewis (2003) and Card and Lewis (2007) also develop a useful decomposition to analyze the role of adjustment
on the output margin in absorbing immigrant shocks. Card and Lewis conclude that ―most of the inflows appear to
be absorbed by city-specific–within-industry increases in use of unskilled labor‖ (pg. 219).
92
In addition to technological change, we would also consider factor accumulation to be a dynamic force of
considerable significance. It should probably be noted, as Hanson and Slaughter do, that capital accumulation may
be playing a large role as well.
~ 54 ~
from above, while there is certainly an effect of immigration on wages, part of the explanation
for the very small magnitude of that effect is adjustment on the output margin.93
3.3. Increasing Returns, Agglomeration, and Immigration
To this point, we have stressed the fundamental theoretical consistency of the frameworks in use
by trade and labor economists. As we have noted, both rely on assumptions of perfect mobility
within the relevant geographic market, perfect competition within all markets, constant returns to
scale in production, et cetera. The only essential difference between the two is dimensionality,
and here we have argued for a presumption that the number of goods is at least as large as the
number of factors of production. Under this assumption, we have seen that factor-price
insensitivity generally obtains. As we shall see, this seems broadly consistent with the
overwhelming majority of studies which find, at most, small wage/employment effects. At a
minimum, something other than wage adjustment is going on—it might be adjustment on the
output margin (as implied by factor-price insensitivity), or endogenous technological adjustment
(as suggested by Ethan Lewis), or something else, but there just is not much evidence of major
adjustment on the wage margin.
This said, the apparent existence of quite distinct local economies is problematic for either
approach. Even within the state of California, we can observe quite distinct production
structures between a northern economy characterized by high tech industry supporting a high
wage structure and a southern economy in which low tech industry supports a low wage
structure.94 If local labor markets are somehow segmented, this multi cone structure is an
equilibrium. However, the existence of free trade and free factor mobility between northern and
southern California would seem to be completely inconsistent with an account of this sort. This
leads us to the question of whether some form of geographic model supports the endogenous
determination of multiple local cones.
Bernard and Jensen (2000) note that although the United States as a whole experienced
increasing wage inequality, that this fact disguised very different patterns of wage inequality at
the state level. In fact, some states experiencing sharp declines in inequality. They argue that
this fact argues against the view of a well-oiled, highly-integrated U.S. economy – at least in the
short- to medium-terms. In response to employment shocks, Blanchard and Katz (1992) found
that labor markets were integrated after a period of 10 years. Interstate migration does indeed act
to smooth shocks, but it only does so very slowly. Wage adjustments were also extremely
sluggish, with some effects often lingering beyond 10 years. In other words, shocks to regions
are not rapidly transmitted to other regions. This suggests that even the most carefully crafted
research, e.g., such as Borjas‘, which divides workers into industry, occupation, education,
93
Of course, this is not the whole story. As we have already seen, much of the work explaining this effect must be
some combination of the imperfect substitutability between natives and immigrants, and capital accumulation
emphasized by Ottaviano and Peri (2006; 2008), and the technological response emphasized by Lewis (2005; 2008).
94
Similar structures certainly exist in other countries—northern and southern England is another example.
~ 55 ~
experience, race and sex may be biased because it does not also distinguish between locations –
or separate labor markets. There are at least two further implications of this research. Firstly,
the measured effects on local labor markets are genuinely indicative of the small adverse impact
that new immigrants have on native workers and second, that the skating rink hypothesis, in
which each new foreign unskilled worker forces a native off the ice (i.e., to migrate to another
region), is dubious.
In more recent work, Bernard et al. (Bernard et al., 2008; Bernard et al., 2009) show that relative
wages vary across regions in the United States and the United Kingdom. They also show that the
type of industry varies with the skill wage premium and that skill-abundant regions exhibit lower
skill premia than skill-scarce regions. Hence, firms adjust production across and within regions
in response to relative wage differences.
In a Heckscher-Ohlin model with multiple cones of diversification one implication is that
different regions with different skill endowments have different relative wages. In equilibrium,
regions abundant in skilled workers offer lower skill premia. This finding is at seemingly at
odds with economic geography models that have skill abundance and skill premia being
positively related as a result of agglomeration externalities.
The existence of multiple cones suggests that economic activity, as well as factors of production,
tend to agglomerate. Courant and Deardorff (1992) show that when factors are immobile,
regions specialise in the good that uses most intensively its abundant factor. In turn, the
―lumpiness‖ of factor endowments can constitute a basis for trade. The point of course is that
regions within countries may often differ more than they do with comparable regions overseas.
The lumpiness can be sustained by lower prices for non-tradeable goods or by locational
amenities, such as nice weather. In the latter case, real wages wouldn‘t equalise, although
sunshine-adjusted real wages would. Hence, there would be no FPE. In a similar vein, Quah
(1996) finds that regional per capita income varies more strongly with what happens in
neighbouring locations than with other regions of the same country. Likewise, Overman and
Puga (2002) show the existence of regional unemployment clusters in the EU which often span
national borders. These neighbourhood effects are important, regardless of whether the
neighbours happen to be domestic or foreign. They argue that the clustering reflects the
agglomeration effects of economic integration. Interestingly, the polarisation into high
unemployment regions and low unemployment regions cannot be being driven by migration
because intra-regional migration has been falling in Western Europe.95
Hanson (2001) provides a very nice review of empirical work on the new economic geography
models and describes how increasing returns to scale is one of the main reasons why industries
spatially agglomerate. Increasing returns to scale or agglomeration effects can be internal or
95
The EU seems to differ from the United States, where local unemployment significantly influences the migration
decisions of the unemployed. On the other hand, local unemployment has little influence on employed individuals
in the United States. See Greenwood (1997).
~ 56 ~
external to firms. In the former case, transport costs give agents an incentive to locate close to
one another. In the latter case, costs per unit decreases as the industry size increases. This can
occur because a larger market lowers cost of key inputs. For example, highly specialised service
industries or firms can profitably service a large number of firms in a cluster, but would not be
able to do so in isolation. There could also be labor market pooling benefits, where labor is
attracted to the opportunities in the cluster. This lowers costs for firms as well. Last, but not
least, there may be knowledge spillovers due to the informal and formal diffusion of knowledge
afforded by larger clusters. This implies an improved quality and productivity of factor inputs.
In fact, individual wages increase in the presence of more-educated workers in the local labor
force, which is consistent with localised human-capital externalities. An occasional finding in
individual wage regressions is that a measure of average human capital is significant and positive
(e.g. Dickens and Katz, 1987). Wages are also known to be higher in urban areas and areas with
large consumer markets (Hanson, 2001).
However, it is unclear whether agglomeration has wage benefits for workers. For example, de
Blasio and di Addario (2002) finds that industrial agglomeration affects employment
probabilities, but affects neither wages nor wage premia. Such a finding suggests a moderation
of the forces that lead to agglomeration as agglomeration may be partly sustained by workers
migrating to higher wage areas. Worker immobility and equilibrium wage differences that are
not eliminated by migration will actually act as a dispersion force (see Krugman, 1991;
Ottaviano and Puga, 1998; Puga, 1999; Neary, 2001).
[Figure 6 about here]
When regions are skilled labor-abundant, they are attractive to skill-intensive industries. This is
illustrated in Figure 6, which is taken from Bernard et al. (2003). Unit-value Leontief isoquants
for three industries are shown. Endowments of skilled (z1) and unskilled (z2) workers for regions
A and B are also shown. There are two cones of diversification. The relative wage of skilled
workers is easily seen to be lower in B, which is relatively skill-abundant. Obviously, the
production structure will also differ in regions A and B.
The authors reject absolute FPE and, unlike Hanson and Slaughter (2002), relative or
productivity-adjusted FPE for both the United States and for the United Kingdom. They argue
that this is due to the presence of multiple cones of diversification and not to region-industry
technology differences, agglomeration or increasing returns to scale. Factor immobility, of at
least one of the factors, prevents regional factor prices (and endowments) from converging to a
common value across the country. Once again, regions exhibit systematic differences in
production structure.96 Thus, one of their other major findings is that firms reallocate production
96
Kim (1999) finds that factor supplies can account for a large share of the cross-sectional output variation across
U.S. states.
~ 57 ~
facilities that best match their factor needs, i.e., using their words, ―industries move towards
workers more readily than workers move towards industries” Bernard et al. (2003, pg. 14).97
4. Global Effects of International Migration
To this point we have looked at the issue of migration primarily from the perspective of a single,
immigrant-receiving country. We now turn to three issues which are fundamentally about the
international equilibrium: comparative advantage and the pattern of trade; the relationship
between trade and factor mobility; and the brain drain.
4.1. International Equilibrium and Comparative Advantage with (Some) Mobile Factors
The simplest model of international equilibrium with migration is the MacDougall-Kemp model
we discussed briefly above. Recall that, in this model, each country produces one good with two
(or many) factors of production. Equilibrium is determined by equalization of returns to the
internationally mobile factor. This is a useful model for a basic analysis of the allocation of the
mobile factor between countries, migration pressure as a function of immigration policy, optimal
immigration policy, income distribution, and welfare; but, because there is no trade in goods,
comparative advantage cannot be analyzed.
As explained by Ethier (1986c), immigration has an interesting effect on comparative advantage
in the Ricardian model. Free migration equalizes wages, but in the Ricardian model this means
that absolute advantage will determine the location of production (rather than comparative cost
differences). If either country has an absolute advantage in the production of both goods, the
technologically disadvantaged country will simply empty out. In the intermediate case, in which
each country has an absolute advantage in the production of one of the goods, the world
economy functions like a single Ricardian economy, so relative commodity prices are
determined by the technology (i.e. taste plays no role).98 Tastes do, however, play a role in the
determination of the pattern of factor labor flows between the two countries. Specifically, if
world demand is such that, at the technologically determined prices, the demand for the good
produced in , say, the Home country exceeds the capacity of the initial Home labor endowment
to produce that good, migration will flow from Foreign to Home.
Factor mobility in the basic HOS model is also quite straightforward. The classic paper here is
by Mundell (1957), who retained the full set of HOS assumptions and proved a converse to
Samuelson‘s (1948; 1953/4) factor-price equalization theorem. As we discuss in the next
section, under HOS assumptions, factor mobility is at least a partial substitute for commodity
97
Hanson (2001) argues that available evidence in the economic geography literature favours demand-driven
agglomeration in which firms are attracted to densely concentrated regions and large potential local markets
(Krugman, 1991); rather than in which workers benefit from being close to other workers (as in Black and
Henderson, 1999).
98
Jones (1980) develops an interesting analysis with nationally fixed factors and globally ―footloose‖ factors in
which comparative and absolute advantage both play a role.
~ 58 ~
mobility. One way of seeing this is that free trade without factor mobility can produce the same
equilibrium (in the sense of final prices and allocations) as free factor mobility without trade.
The key here is that the endowments of the two countries must fall in the same factor-price
equalization region (Travis, 1964, Chapter 1; Dixit and Norman, 1980, pp. 110-125). Where
specialization can interfere with complete equalization of factor-prices, if one of the factors in
mobile as well, there must be complete equalization of factor prices. In the absence of trade,
mobility of one factor will move the national economies toward the integrated equilibrium, and
to it if the initial endowments are sufficiently similar. Furthermore, the directions of trade and
migration are predictable based on initial endowments and knowledge of the common
technologies.
As we noted in sections 2.4 and 2.5, the m n HO model can be generalized to the case of
international factor mobility. An important series of papers uses duality methods, primarily the
properties of the GNP function, to develop such generalizations.99 The first step was taken by
Svensson (1984), who develops a two-country, m n model of trade with international factor
mobility. As in Dixit and Woodland (Dixit and Woodland, 1982), the analysis proceeds by
considering identical countries, so under HO assumptions there is no trade in goods or factors,
then considering the effect of a marginal change in endowments on equilibrium trade in goods
and factors.100 Within this framework, and using a ―controversial identification of Rybczynski
effects with generalized factor intensities‖ (pg. 375), the presence of factor trade weakens the
relationship between commodity trade and factor endowments.101 Of course, there is a
relationship of the usual kind between factor use and trade, but factor use is endogenous, so the
usual causal inference in the standard HO model is not available. We will return to the nature of
the link between commodity trade and factor trade in more detail in the next section.
Ethier and Svensson (1986) develop the analysis beyond the case of marginal changes in the
neighborhood of an autarkic equilibrium and consider the full range of standard comparative
statics on the m n model (e.g. factor-price equalization, Samuelson reciprocity, StolperSamuelson, Rybczynski, Heckscher-Ohlin). Most of these comparative statics survive the
introduction of international factor mobility as long as, in the notation of section 2.5, n + mT ≥ m.
That is, the number of internationally traded goods and factors is at least as large as the number
of factors. Of relevance here is that Ethier and Svensson are able to deliver a fairly strong
These papers build on Dixit and Woodland‘s (1982) analysis of the link between factor endowments and trade
volumes in an m n HO model. Also very useful are papers by Neary (1985) and Falvey and Kreickemeier (2005)
who apply these duality methods to the case of international trade and factor mobility in a world with one large and
one small economy.
100
Ohyama (1989) pursues essentially the same strategy.
101
As Svensson (1984, footnote 6) notes, ―factor intensity‖ is an ambiguous concept in general models. The problem
with the ―generalized factor intensities‖ used in this paper is that they are defined by the effect of the factor on
output—i.e. where ∂2G/∂pi∂zj = ∂yi/∂zj > 0, sector i is said to be intensive in the use of factor j. But to use this
definition of intensity to discuss Rybczynski effects seems tautological.
99
~ 59 ~
quantity version of the Heckscher-Ohlin theorem, though were not able to deliver much in the
way of a price version.
Beginning with important papers by Kemp (1966) and Jones (1967), the focus of much of the
literature on trade and migration in general equilibrium shifted to models in which countries
differ in their technologies. Ruffin (1984) refers to the HOS model with mobile capital under
international differences in technology as the Kemp-Jones model. Jones argued that, with
technological differences, there was a presumption that international factor mobility would lead
to specialization of at least one economy: ―If capital is mobile between countries, whether or not
impeded by a tax, complete specialization is apt to occur in at least one of the countries,
regardless of the similarities or differences in technical knowledge as between the two countries‖
(Jones, 1967, pg. 2). This will certainly be the case if one country has a technological advantage
in one sector. In that case, as stressed by Jones and Ruffin (1975) and Ferguson (1978), the
model will have a strongly Ricardian flavor with technological difference determining the pattern
of international flows.102 However, if there is a reversal of comparative costs, there will be some
factor-price ratio at which both countries are unspecialized and there will be a range of feasible
outputs over which the allocation of production between the countries is indeterminate (i.e. there
is a ―flat‖ on the world production frontier, see: Inada and Kemp, 1969; Chipman, 1971; Ethier
and Ross, 1971; Uekawa, 1972).103
Markusen and Svensson (1985) seek to extend this analysis to the m n case. They follow Dixit
and Woodland (1982) and Svensson (1984) in beginning with identical countries and, where the
previous papers consider the effect of a marginal change in endowments, considering the effect
of a marginal change in technology on one of the countries. Not surprisingly, it is difficult to
derive much in the way of general results in this model. However, assuming a specific form of
product-augmenting technical change, Ethier and Svensson are able to show that factor mobility
strengthens the relationship between trade and endowments in the no factor mobility case; and
are able to show that countries will import factors that are used intensively in the sectors with
technological advantage. As in the Kemp-Jones case, international factor mobility pushes
countries to specialize more strongly and induces a Ricardian element in the model. The authors
also consider factor-augmenting technological differences between countries, but the results are
less clear cut.
As Jones (1970) and Ruffin (1984) stress that the parallel is less than perfect if one country‘s technological
advantage is identical in both sectors. In this case, in the mobile factor version, the country with superior
technology will export the good whose production uses the mobile factor intensively, while in the Ricardian model
with factor mobility, there will be no trade (i.e. autarky prices between the countries will be the same if one
country‘s technology is uniformly superior in both sectors).
103
Of these, a particularly important result is Chipman‘s (1971, theorem 2) substitution theorem, which provides
conditions under which non-specialization (and a flat on the world production frontier) are to be expected. The logic
of this result is exposited in Ethier and Ross (1971) and Jones and Ruffin (1975), and extended and examined in
greater detail in Uekawa (1972), Ferguson (1978), Woodland (1983), Brecher and Feenstra (1983), Inoue (1986),
and Tawada (1989). In addition to providing a particularly clear exposition of Chipman‘s analysis, Ethier and Ross
(1971) develop a dynamic analysis that qualifies the Chipman et al. analysis.
102
~ 60 ~
A different generalization involves introducing transaction costs into an otherwise standard HOS
model so that with trade in goods alone factor prices are not equalized, which creates a new basis
for international factor mobility with trade in goods. Norman and Venables (1995) develop this
analysis and derive the pattern of trade in goods and factors endogenously (see also Tombazos et
al., 2005 for related work). Not surprisingly, the interactions between commodity and factor
trade can be quite complicated.
An alternative way of avoiding specialization is to work with a multisector specific factors model
with an internationally mobile specific factor. With the specific factors model, we must first
decide whether the globally mobile factor is intersectorally mobile or specific to one of the
sectors. This would seem to be tricky on a priori grounds. Suppose, as is often the case, that we
are interested in unskilled labor mobility, and that we denote its factor payment w. Does it make
more sense to think of this as an undifferentiated factor that is used in all sectors (e.g. field
hands, janitors, construction workers) or, recalling that we are working with a relatively low
dimensional model of the economy as a whole, do we think of unskilled labor as being specific
to some broadly construed sector (labor intensive agriculture, unskilled services, or some
composite of such sectors) with a factor like capital as the mobile factor? I don‘t think there is a
good answer to this question. If we presume, as in the HOS case, that preferences are identical
and homothetic and technologies are identical and linearly homogeneous across countries, the
analysis of comparative advantage is straightforward in either case.
If the internationally mobile factor is used in both sectors, the presence of specific factors in both
sectors under standard technologies implies that equilibrium will involve positive use of the
internationally (and intersectorally) mobile factor in both countries. But this means that w = w*
(i.e. unskilled labor moves until the wage is equalized) and both countries produce both goods in
equilibrium. However, this implies that the payments to the other factors must be equalized as
well. With identical, homothetic preferences and equalization of goods prices by trade in goods,
both countries indirectly consume factors in the same proportions, so each country will export
the product that uses the specific factor with which it is abundantly endowed.
Suppose, instead, that unskilled labor is specific to a single sector and that the intersectorally
mobile factor is not internationally mobile.104 Now there are two possibilities: mobility does not
equalize wages and so all unskilled labor ends up in the country with the higher wage; or
mobility equalizes the unskilled wage between countries. In the first case, the country of
immigration produces both goods but exports the good using the internationally mobile specific
factor, while the country emigration specializes in the production of (and thus exports) the other
good. In the second case, unskilled wages are equalized by migration with positive allocations
of unskilled labor to both countries. In this case, both countries produce both goods and, as in
104
While there is no particular reason that this model should not be used to analyze migration, as a matter of fact, it
has not been much used for this purpose. However, especially since Caves (1971), the mobile specific factor model
has been seen as a simple, natural general equilibrium framework of the analysis of foreign direct investment
(Amano, 1977; Burgess, 1978; Falvey, 1979; Jones and Dei, 1983; Jones, 1989; Neary, 1995).
~ 61 ~
the previous case, all factor-prices are equalized. As in the previous case, comparative
advantage will be determined by the relative endowments of the immobile factors.
4.2. Are Factor Mobility and Commodity Mobility Complements or Substitutes?
An issue of theoretical, empirical and policy interest is the degree to which trade and migration
are substitutes or complements. As a policy matter, it is often argued that countries have a
choice between admitting goods and admitting people. During the NAFTA debates, proponents
of NAFTA often argued that the US could reduce immigration pressure by increasing its trade
with Mexico.105 Similar arguments have been made about the EU‘s eastern enlargement (e.g. in
Layard et al., 1992). The default position for most people seems to be that trade should be
expected to substitute for immigration. The logic is clear enough, and derives directly from the
HOS model: commodities are simply bundles of factors of production, so trade along HOS
comparative advantage lines should cause factor prices to become more similar, reducing
pressure for migration.
4.2.1. Complements and Substitutes in Theory
--Figure 7 about here-Robert Mundell‘s (1957) classic develops precisely this logic. In the context of a standard 2factor 2-good 2-country HOS model, Mundell proves a converse to Samuelson‘s (1949)
factor-price equalization theorem. Samuelson showed that, under the full set of HOS
assumptions and as long as both countries remained unspecialized after the opening of trade, free
trade between countries that differ only in their endowments of productive factors, in addition to
equalizing commodity prices, must equalize the real prices of factors even though they are not
internationally mobile. Furthermore, even if one country specializes before factor-prices are
completely equalized, commodity trade must cause factor-prices to move toward equalization.
The key to understanding this result is that, in the HOS model, there is a one-to-one,
technologically determined, relationship between relative commodity prices and relative factor
prices. Figure 7 is a diagram of the sort Samuelson used to illustrate this fact (Samuelson, 1949,
pg. 188).106 As Mundell argued, under the same conditions (in particular, non-specialization)
that guaranteed factor-price equalization, if a wedge is driven between commodity prices (say,
by a tariff) but factor-mobility is permitted, that factor mobility will support the same allocations
as in the free trade equilibrium. Not surprisingly, the same diagram illustrates this fact: start
from an equilibrium where countries are in autarky, so that they are at different points on the p-ω
schedule; now permit factor mobility so that factor-prices are equalized; it must be the case that
See, as one among many examples, the New York Times article (18 February 2007) called ―NAFTA Should
Have Stopped Illegal Migration, Right?‖
106
Note that we have drawn the figure under the assumption that good 1 is capital intensive. Thus, if p = P2/P1 and
ω = w/r, we know from the Stolper-Samuelson theorem that the technologically determined relationship between
these two variables is positively sloped.
105
~ 62 ~
commodity prices are equalized. Furthermore, given the assumptions on technology and
demand, this must be the same relative commodity price and relative factor-price as in the free
trade case.107 Thus, as the public logic maintains, in this case trade and immigration are
substitutes.
However, it turns out that most movements away from the strict HOS framework open the door
to complementarity (or, at least, greater complexity) in the relationship between commodity trade
and factor trade. It is probably worthwhile to follow Wong (1986, appendix 1) in being clear on
just what we will mean by ―substitutes‖ and ―complements‖. As Wong argues, we can focus on
the relationship between: physical movement of commodities and factors; commodity and factor
prices as a function of such movements; and final allocations under commodity or factor
movements.108 Wong also emphasizes that each of these is made up of two comparisons: the
effect of commodity trade on immigration flows, prices and allocations; and the effect of
immigration on commodity trade, prices and allocations. We follow Wong in referring to:
1) Quantity substitutes: if an increase in the volume of trade reduces the volume of
migration (trade substitutes for migration); and if an increase in the volume of
migration reduces trade in commodities (migration substitutes for trade). If the
relationship is symmetric, we will say that trade and migration are quantity
equivalent. If an increase in the volume of one increases the volume of the other, we
will say they are quantity complements.
2) Price substitutes: if an increase in the volume of trade reduces the difference in
factor-prices between countries (trade substitutes for migration); and if an increase in
the volume of migration reduces the difference in prices between countries (migration
substitutes for trade). If the relationship is symmetric, we will say that trade and
migration are price equivalent. If an increase in the volume of one causes the prices
of the other to move further apart between countries, we will say they are price
complements.
3) Allocation equivalence: if trade is sufficient to reproduce the integrated equilibrium;
and if migration is sufficient to reproduce the integrated equilibrium.109 If trade and
An early, and important, criticism of Mundell‘s analysis argued that, if tariffs generate the wedge between
commodity prices, and the payment for the imported factor must be repatriated to the factor‘s Home country, a
wedge will remain driving the economy to specialization and non-equalization (Rakowski, 1970; Flatters, 1972). It
is worth making two comments here: first, the factor-mobility remains a substitute, just not a perfect substitute; and
second, to the extent that immigrants primarily consume where they work (and under the maintained assumption of
identical, homothetic preferences across countries), this criticism is less relevant for the case of immigration.
108
Wong refers to the last in terms of ―efficiency‖, while Ethier (1996, pg. 52) refers to ―equilibrium
substitutability‖. Both refer to the same fact--equilibria in which allocations of commodities to households are
identical. Such equilibria are obviously welfare equivalent. We prefer to refer to the fundamental fact (allocations)
rather than consequences of that fact.
109
The integrated equilibrium is the equilibrium of the single global economy in which all factors and goods are
perfectly and costlessly mobile—i.e. before Samuelson‘s angel (Samuelson, 1949, pg. 194) divides the world into
separate countries. This integrated equilibrium has proved a highly useful baseline. For more details on its
construction and examples of its use, see: Travis (1964, Chapter 1); Dixit and Norman (1980, pp. 110-125); and
107
~ 63 ~
migration are individually allocation equivalent, we say following Purvis (1972) and
Wong (1986) that trade and migration are allocation substitutes. If both are required
to reproduce the integrated equilibrium, they are allocation complements.
With these definitions in hand, it is easy to see that in the HOS model trade and migration
quantity equivalent, price equivalent, and allocation equivalent. If both countries produce both
goods in all equilibria (i.e. under free commodity trade, free trade in factors, and free mobility of
both) these equivalences are perfect. The existence of a technologically determined, one-to-one
relationship between commodity prices and factor prices (as in figure 7) is an essentially 2 2
phenomenon.110 However, as long as there are at least as many final commodities as factors, it is
once again the case that, if country endowments are relatively similar (as defined by sharing the
same cone of diversification), trade and migration are price, quantity and allocation equivalent
(McKenzie, 1955; Rodriguez, 1975; Neary, 1985; Falvey and Kreickemeier, 2005).111 The
situation becomes harder to interpret in a world that involves some mobile factors as well as
mobile goods (e.g. Svensson, 1984; Ethier and Svensson, 1986). When we consider
substitutability of commodity for factor trade, under any of the definitions, are we interested in
mobility of the previously immobile factors (as in all of the previous analyses discussed in this
section), or are we interested in the already mobile factors. Denoting the set of mobile factors by
k and the immobile factors by l, Svensson says that mobile factor i is cooperative with immobile
factor j if ki / l j 0, where the tilde denotes the amount of mobile factor i in use, and
competitive if the inequality is reversed, both of which are possible. Svensson focuses on trade
in the mobile factors (k) and finds that whether mobility of k and trade in goods are (quantity)
substitutes or complements depends on whether l and k are cooperative (substitutes) or
competitive (complements).
--Figure 8 About here-Now let us return to the 2-factor 2-good model and retain all of the HOS assumptions except
we suppose countries have identical initial endowments and that one country (―Home‖) has a
Hicks neutral superior technology in the production of good 1. In terms of the technological
relationship between factors and commodity prices in figure 7, if this is the only change relative
to the economy represented there, the Home country will be represented by a curve that lies
Helpman and Krugman (1985, Chapter 1). In general, and abstracting from tricky issues of second-best (i.e. in the
context of other distortions considered in this literature), the integrated equilibrium should be the weakly most
efficient of the three candidate equilibria (free trade only, free migration only, integrated equilibrium).
110
Global univalence, the generalization of the no factor intensity reversal condition which underwrites the one-toone mapping between the commodity price vector and the factor price vector, is not generally a property of higher
dimensional versions of the Heckscher-Ohlin model. A detailed technical development can be found in Nikaido
(1968, Chapter 7). Very clear short presentations can be found in Ethier (1984, pp. 150-151) and Woodland (1982).
Parthasarathy (1983) and Campbell (1993) present many attempts to carry this sort of analysis further
111
As Deardorff points out, inference in the m n case is affected by both demand conditions (1986) and
dimensionality (Deardorff, 1994).
~ 64 ~
uniformly below that of the Foreign country (which is represented by the original curve).112
Figure 8 reflects this change. Now suppose that free trade results in the equalization of
commodity prices at pw. Note that national factor prices are different. Specifically, as drawn, the
return to labor in Home exceeds the return to labor in Foreign. In this trading environment the
Home country exports L-intensive good 1. If we now permit migration, labor will flow to the
Home country, increasing its comparative advantage in standard Rybczynski fashion and, thus,
increasing trade. So factor mobility is both price and quantity complementary to free trade in
goods. Now suppose, instead, that free migration is permitted following the technical change.
L will move until real wages are equalized. If both countries continue to produce both goods, the
factor-price ratio (ω) will be equalized but commodity prices will move apart. If trade is now
permitted, there will be increased production of each country‘s comparative advantage good,
which should result in increased migration. Thus trade is price and quantity complementary to
migration.113 It is easy to see that the migration only and trade only equilibria involve very
different commodity and factor prices. Thus, neither alone moves the economy to the integrated
equilibrium. Rather, that requires both to be fully mobile, so trade and migration are allocation
complements as well. Markusen and Svensson (1985) show that a dimensional generalization of
the above case is available. Specifically, if the countries differ only in terms of productaugmenting technological differences, they show that trade and factor mobility are quantity
complements.114
Markusen (1983) and Ethier (1996) consider a variety of other sources of comparative
advantage, including taxes, economies of scale, imperfect competition (monopoly, oligopoly,
and monopolistic competition), and factor market distortions. Ethier summarizes these additional
cases as follows:
There is a strong presumption that intra-industry trade and trade due to aggregative economies of scale
or to international differences in the degree of imperfect competition are strongly complementary to
migration. There is also a strong presumption that inter-industry trade due to disaggregative
economies of scale or to monopolistic competition relates to migration in the same ways as does
comparative advantage trade. (Ethier, 1996, pg. 65)
Taking all of this together, it seems clear that theory alone does little to underwrite any strong
presumption of a complementary or substitutive relationship between trade and migration.
However, it is interesting to note that research on the foundations of comparative advantage over
112
If, instead, we assume that the Foreign country has a Hicks neutral superiority in the other sector, the schedule
representing its relationship between commodity prices and factor prices would shift uniformly up relative to the
original schedule.
113
Wong (1986, proposition 3) shows that, while it holds in the case presented above, the two-way relationship is
actually somewhat more complicated. Specifically, whether or not labor mobility is a quantity substitute for trade
depends on whether the good experiencing technical change in an importable or an exportable; and whether or not
trade is a quantity substitute for labor mobility depends on
114
Markusen and Svensson (1985) show that general results on factor mobility with technological differences in
high dimensions are not available. Even in the case of commodity augmenting technology differences, the result is
derived, following Dixit and Woodland (1982) and Svensson (1984), only for infinitesimal differences under the
assumption of m > n.
~ 65 ~
the last couple of decades has stressed precisely the factors that imply a presumption of
complementarity (i.e. technological differences and monopolistic competition as a foundation for
intra-industry trade). This leads us to the empirical evidence on the relationship between trade
and immigration.
4.2.2. Empirical Research on Complements and Substitutes
All of the theoretical work we have discussed to this point considers the question of whether
trade and migration (or capital flows) are substitutes or complements in terms of factor arbitrage.
That is, the source of any relationship is taken to be the way factors respond to differences in
wages (or rentals) between countries. Early empirical work on this question was motivated in
precisely this fashion. Early work by Horiba and Kirkpatrick (1983) looked at interregional
trade and migration between regions (South and non-South) in the US in the 1960s. This paper
looked at quantity flows of people (considering heterogeneity of labor) between regions and
(using standard input-output techniques) the flows of labor embodied in trade. Under the
maintained assumption of an m n HO-type economy, Horiba and Kirkpatrick predict that labor
should flow from a region relatively well-endowed with labor to regions relatively poorly
endowed with labor; and, in standard HOV fashion (see Chapter by Bernhofen in this
Handbook), embodied trade in factors should follow the same pattern. For our purposes, the key
finding was that both of these predictions were borne out.115 In addition, there was some
evidence of a tendency toward factor-price equalization. These results would seem to be broadly
consistent with a substitutive relationship between trade and labor mobility. In a recent paper,
Horiba (2008) carried out the same analysis on more recent data (from the 1970s and 1980s) and
confirmed his earlier finding. These results are closely related to a growing body of trade
research, discussed above, whose results suggest that the HO model, under various plausible
extensions of the model (e.g. the presence of trading costs or Hicks neutral international
differences in technology) and generalization of the Rybczynski theorem, does a reasonably
115
Thus, as Horiba (2008) notes, the regions endowments become more similar over time, but this convergence is
slow. Collins, O‘Rourke and Williamson (1999) ask a similar set of questions using historical data for the ―Atlantic
Economy‖ in the period 1870-1936. They also look at whether quantities of trade and migration are positively or
negatively correlated. If there is a positive correlation, they take that as evidence of complementarity; if they are
negatively correlated, they take that as evidence of substitutability; and if there is no correlation, they call that a
―neutral‖ result. As the formal analytics in Horiba and Kirkpatrick and Horiba suggest, it is far from clear that these
correlations relate to the underlying issue of complementarity in any obvious way. Interpreting the panel analysis is
similarly problematic. In any event, the overwhelming number of cases are characterized by ―neutral‖ results.
In a methodologically related paper, Gaisford (1995) revisits the Leontief paradox under the assumption that
capital is mobile. Gaisford applies the Ethier and Svensson (1986) model to rederive HOV results for the case with
capital mobility and finds that the US is revealed capital intensive in terms of direct and indirect export of capital
relative to labor.
~ 66 ~
good job of accounting for production patterns, and research on growth which fails to find a link
between migration and convergence.116
A more direct approach to evaluating the relationship between trade and migration involves
introducing migration into a theoretically well-grounded model of international trade. One
approach that has been applied a number of times involves estimating a maximum value function
consistent with competitive models and evaluating the relationship implied. We have already
seen this methodology applied to the question of the relationship between immigration and
wages (section 3.2.1 above). An early paper by Wong (1988) estimated an indirect trade utility
function, for an economy with three final goods and three factors of production, for US annual
data from 1948-1973, estimating elasticities that allowed him to evaluate the effects of migration
on trade. This function is estimated, in translog form, on prices for home produced durable
goods, home produced nondurable goods and services, and imported goods and services, and
endowments of capital, land, and labor, for a number of years between 1948 and 1983. Wong
finds that trade is a quantity complement to immigration. Ulrich Kohli is the scholar that is
probably most associated with the development and application of these methods to international
trade and migration. In his approach, trade is treated as an intermediate input to the production
of GDP.117 It is straightforward to treat immigrant labor in a similar fashion.118 In this
framework, using Swiss data for 1950-1986, Kohli finds that non-resident labor and imports are
complements in the quantity sense (Kohli, 1993; 1999). In a more recent paper, Kohli (2002)
explicitly considers domestic output and exports as outputs in a joint revenue function and, once
again, finds immigration and imports to be quantity complements, but essentially no relationship
between immigration and exports. Hijzen and Wright (2010) apply the Kohli (1993; 1999)
methodology of treating imports and immigrants as intermediate inputs to final output using UK
data for the period 1975-1996. In an important extension, Hijzen and Wright divide immigrants
(and the endowments of domestic labor) into skilled and unskilled labor—thus, production
involves capital, domestic skilled labor, domestic unskilled labor, immigrant skilled labor,
immigrant unskilled labor, and imports. In addition, because they want to permit output
adjustment, Hijzen and Wright consider two outputs—skill-intensive and unskilled-intensive
outputs. The results here are interesting: skilled immigrants are quantity complements with
trade; but unskilled workers are, if anything (i.e. the result is statistically insignificant), quantity
substitutes.119
116
For the lack of a relationship between migration and convergence, see Barro and Sala-i-Martin (1991) and related
work by Kim (1998) suggesting an important role for industrial structure, as well as technological change, in
accounting for convergence.
117
For a text treatment of Kohli‘s approach to trade modeling, see Kohli (1991).
118
It is probably worth noting that Kohli‘s work deals with ―non-resident workers‖ (i.e. guest-workers) not
―immigrants‖ in the sense that most of the empirical work considered here analyzes.
119
As the authors suggest, this seems prima facie plausible—i.e. an increase in the factor used intensively in the
exportables sector should, via Rybczynski effects, increase production of exportables and thus trade; while an
increase in the factor used intensively in importables should increase Home production of importables, thus reducing
~ 67 ~
To this point we have considered empirics explicitly motivated by the theoretical frameworks
presented in section 4.2.1. In all of this work, migration (factor mobility more generally) is an
arbitrage activity. Trade costs, especially such essentially social cost reducing phenomena as
networks, play no role. However, the great majority of empirical research addressing the
relationship between trade and migration has taken place in the context of a gravity model, where
migration and/or trade enter as a factor that affects costs. Thus, while the empirical issue of
whether trade and migration are substitutes or complements can be addressed, the theoretical
motivation ends up being rather different. Most of this research treats aggregate exports or
imports between a pair of countries as the dependent variable and immigration as a dependent
variable. In most of these papers, this is seen as reflecting either a direct increase in the demand
for goods from the immigrants‘ home countries; or a reduction in information costs (in either
direction) resulting in increased trade.
5. Migration as People Moving: Social Structures, Institutions and Political Economy
The research we have reviewed to this point treats migration as an instance of factor arbitrage,
where the relationship between trade and immigration emerges from the general equilibrium.
For this analysis, there was no essential difference between capital and labor: both generate
income for households and can be used to produce outputs under given production functions. To
the extent that there is any difference, it is not uncommon to treat the income from
internationally mobile capital as consumed in its Home country, while the income from mobile
labor is consumed in the Host country.120 This is an extremely useful simplification for many
analytical purposes; however, it is also the case that, in many ways, capital and labor are
fundamentally different things. In the words of the Swiss writer Max Frisch commenting on
guest worker programs: ―We wanted workers, we got people‖. Capital, by contrast, is
fundamentally separable from its human owners.121 Thus, in addition to differences in the skill
mix (and possibly taste differences) of migrants relative to natives, immigrants also carry cultural
differences that might affect their willingness to cooperate with natives in unions (and vice
versa). Perceptions of social/citizenship difference might affect the legitimacy of state transfer
programs or participation in reciprocal arrangements natives in the labor market. These
perceptions of difference even go to economically important social values like fairness.
Sociologists and political scientists have dealt, seriously and at length, with many of these issues.
trade. However, it is tricky to know how to evaluate positive immigration of both labor factors (though the UK may
well be a net exporter of capital).
120
The reality, of course, is more complex—target earning immigrants intend to return home with most of their
income for investment in the Home country and nearly all immigrants repatriate at least some income; similarly,
many small capitalists follow their capital to the countries in which they invest. Nonetheless, this simple distinction
is useful and sufficiently close to the reality to underlie basic factor arbitrage models. Under conditions of identical
and homothetic preferences, even this difference is essentially irrelevant.
121
Human capital is, of course, inseparable from humans. That is why, legally and socially, immigration of human
capital is treated as labor, not as capital. It is also worth noting that research on foreign direct investment, since
Hymer‘s (1960/1976) famous MIT dissertation, has tended to emphasize firm-theoretic factors rather than capital
arbitrage. An important early paper introducing firms into general equilibrium models is Ethier (1986d). Current
work follows Antras (2003) in drawing on contract theoretic models.
~ 68 ~
In this survey we will focus on those elements that emerge directly in the analysis of
international trade, or apply trade theoretic methods. Specifically, we will focus on three issues
that deal with social institutions, broadly construed (networks, illegality, and welfare states); and
then turn to a brief discussion of political economy issues.
5.1. The Social Structure of Migration: Networks, Migration and Trade
As tables 1 and 2 above show, emigration and immigration are far from uniformly distributed
across the globe. This heterogeneity becomes even more pronounced as one takes account of
individual-level variation (e.g. by age, gender, education, etc.). Accounting for this
heterogeneity in aggregate patterns has been a very active area of research for a long time, and
that activity continues to this day. For economists, the essential starting point for such analysis is
the notion that emigration emerges from a utility maximizing choice. That is, immigrants
compare the benefits of staying in their home country to the benefits (net of costs) of moving to
some new country. Because this decision involves comparison of returns to various choices that
occur in time, it is convenient to conceive of the choice as one of investment in human capital
(e.g. Sjaastad, 1962). In making such a comparison, a potential emigrant compares the origin
country wage to that in alternative destination countries. For each destination country, the
potential emigrant must deduct the costs of migrating to that country. Since all of this must be
done in expectation, one might also want include a measure of the likelihood of finding a job
(e.g. a comparison of unemployment rates). An important advance in the theoretical and
empirical analysis of immigration flows was Borjas‘ (1987) adaptation of Roy‘s (1951) model of
occupational selection to the case of selection among emigrant destinations. While Borjas was
primarily interested in identifying the causes and consequences of differences in immigrant
―quality‖ across source countries to the US, he also argues that the same analytical framework
predicts emigration pattern across those source countries.
Taking per capita GDP as a proxy for wages and distance as a proxy for costs, one can represent
the Roy-Borjas selection model, loosely speaking, by a gravity model.122 Gravity modeling of
migration generally takes the form:
mijt Gijt ijt ijt ,
(48)
Where mitj is the value of migration from origin country i to destination country j; Gijt is a matrix
of standard gravity variables (e.g. origin and destination GDP, distance, and other ―migration
122
Immigration, and related issues of inter-regional travel, has been a focus of research using the gravity model for
virtually as long as the gravity model has been applied (e.g. Ravenstein, 1885; 1889; Zipf, 1946). For useful surveys
tracing gravity modeling of migration back to the 19th century, see: Carrothers (1956) and Greenwood and Hunt
(2003). The majority of this work focuses on inter-regional/intra-national migration, but the results are quite
consistent with that which focuses on international migration. For surveys of this work, see Greenwood (1975;
1997) for the case of developed countries, and Lucas (1993) for less developed countries. In addition to Sjaastad
and Borjas, early attempts to derive a gravity model from utility maximizing fundamentals include Ginsberg (1972)
and Smith (1975; 1976). For a general overview of gravity modeling, with a primary focus on international trade
see Bergstrand and Egger‘s Chapter X in this volume.
~ 69 ~
cost‖ variables), λijt is a matrix of fixed effects, and ε is an error term. Among the papers
motivating a gravity-based analysis by reference to Sjaastad and Roy-Borjas are: Karemera,
Oguledo, and Davis (2000); Pedersen, Pytlikova and Smith (2006); Gallardo-Sejas, et al. (2006);
Clark, Hatton and Williamson (2007); and Lewer and Van den Berg (2008). 123 More recently, in
addition to Borjas (1987) a number of papers have sought to make the link between the RoyBorjas model and the gravity framework more explicit, e.g.: Dahl (2002); Mayda (2008a);
Grogger and Hanson (2008); and Ortega and Peri (2009). All of these papers consistently find
destination GDP positively and distance negatively associated with migration flows.
Unexpectedly, origin GDP (which should be negatively associated with migration and about the
same magnitude as origin GDP) is generally not significantly different from zero, and even
sometimes of the wrong sign.124 In addition to such standard gravity variables, immigration
policy variables in the destination country have been found to have a significant effect (Bertocchi
and Strozzi, 2008; Mayda, 2008a; Letouzé et al., 2009; Ortega and Peri, 2009). We note, for
later reference, that a small number of papers introduce some trade variable into the migration
gravity model (Molle and van Mourik, 1988; Gallardo-Sejas, Pareja, Llorca-Vivero and
Martinez-Serrano, 2006; Letouzé, Purser, Rodríguez and Cummins, 2009). In all cases, the trade
variable is positive and, usually, significant.
Stories about immigration, whether contemporary or historical, journalistic, academic, or
fictional, have long stressed the role of social relations as an essential element in the decision to
engage in migratory behavior. Migrants are linked to both their home and host countries by
networks that provide information, resources, and comfort, all in a variety of forms (Hugo, 1981;
Boyd, 1989; Gurak and Caces, 1992; Portes and Sensenbrenner, 1993). Where economists have
tended to analyze immigration as reflecting optimization by individuals (Sjaastad, 1962; Borjas,
1987) or households (Mincer, 1978; Stark and Levhari, 1982; Katz and Stark, 1986),
sociologists/demographers have been very successful building network models of the
immigration decision. 125 More recently, as economists have developed increasingly
123
The empirical success of gravity models of migration has led to their extensive use in policy research as a
predictor of migration pressure. For example, a substantial body of policy research was interested in predicting
migration flows to the European Union as a result of the various enlargements (e.g. Molle and van Mourik, 1988;
Alvarez-Plata et al., 2003; Brücker and Siliverstovs, 2006).
124
In the gravity literature on migration, destination GDP is a ―pull factor‖ and origin GDP is a ―push factor‖. In the
theory, since what matters to the potential migrant is income net of costs, the ultimate comparison is [(wD – wO) – C]
where the w‘s are wages in origin and destination and C is the cost of migration from O to D. It should be clear that
the effects of the first two terms enter this analysis symmetrically. Thus the asymmetry in the results is a puzzle.
Among attempts to account for this anomaly are: poverty constraints in the context of large fixed migration costs
and imperfect credit markets (Lopez and Schiff, 1998; Yang, 2008); age heterogeneity in response to destination
restrictions (Hunt, 2006); formal restrictions operating under political economy constraints (Mayda, 2008a); and
inappropriate specification of the econometric form estimated (Grogger and Hanson, 2008).
125
Beginning with the modern classic Return to Aztlan (Massey et al., 1987), Douglas Massey and his colleagues
have developed an impressive body of research focusing on these networks between Mexico and the United States
(see e.g. Massey, 1990; Alarcón, 1992; Massey and Espinosa, 1997; Massey et al., 1998; Phillips and Massey, 2000;
Palloni et al., 2001; Durand and Massey, 2004; Fussell and Massey, 2004; Massey, 2008). In addition to the
massive literature on Mexican migration to the US, the importance of networks to the migration decision have been
found for many other cases as well—e.g. Japanese (Jedlicka, 1979);Italians (Moretti, 1999); Germans (Bauer and
~ 70 ~
sophisticated models of networks, these considerations have increasingly been built into
migration analysis.126 Empirical work seeking to explain migration patterns now commonly
includes variables intended to capture network effects—usually some measure of stock of
immigrants from a given home country in a given host country. The key here is not that
networks substitute for rational choice of destinations by migrants, but that networks affect the
costs of migrating to one market versus another.
Just as networks play a fundamental role in getting migrants from one country to another, and
helping determine the allocation of migrants from home to host countries, networks also play a
fundamental role in organizing the social and economic life of migrants once they arrive in a
given host country.127 Of particular interest for us is the way that networks affect the
relationship between migration and trade. Broadly speaking, networks of migrants might affect
international trade by responding to two sources of transaction costs: uncertainty/incomplete
information; and asymmetric information/opportunism. With respect to the first, the idea is that
trade in some commodities requires search, and that the cost of such search varies systematically
across countries. Especially for the case of specialized/differentiated goods, the lack of a deep,
well-developed arms-length market can require costly search. When this search must occur
across international borders, especially between countries with very different social and/or
political structures, those costs can be quite high (Rauch, 1999; Rauch and Casella, 2003; Portes
and Rey, 2005). In this situation, migrants can act as ―weak ties‖ in Granovetter‘s (Granovetter,
1973; 1983; 2005) sense of providing an information bridge between two dense networks (in this
case, suppliers in the home market and demanders in the host market). That is, because migrants
possess economic, cultural, and institutional knowledge about both the home and the host
markets, they are able to mediate economic exchange between those markets, thus increasing
trade above what it would be in the absence of such migration. In this case, migrants engage in
market creation. Because such information problems are expected to be more severe for
differentiated products, we would expect to find strong positive effects for trade in such
products, especially between countries with very different economic, cultural, and political
Zimmermann, 1997; Wegge, 1998); Hong Kong Chinese (Wong and Salaff, 1998); Indians (Banerjee, 1983; Poros,
2002; Harvey, 2008);Turks (Böcker, 1994; 1995); and Central and Eastern Europeans (Dahinden, 2005; Haug, 2005;
2008; Elrick and Ciobanu, 2009). For general treatments of sociological theory and methods of network analysis,
see: Marsden and Lin (1982); Wellman and Berkowitz (1988); and Wasserman and Faust (1994). Of particular
interest to economists is the work of Harrison White (1992; 2002) and Ronald Burt (1992; 2000).
126
Although early work by economists recognized the role of networks (e.g. Nelson, 1959; Rees, 1966), economists
generally came late to the analysis of networks, in general and with specific reference to migration. However,
networks are now an active area of research in economic theory and empirics. For excellent text treatments see:
Goyal (2009) and Jackson (2008). For examples of theoretical analyses of network effects in migration see:
Carrington, Detragiache, and Vishwanath (1996);Helmenstein and Yergorov (2000), Moretto and Vergalli (2008);
Teteryatnikova (2008), and Moenius, Rauch and Trindade (2007).
127
The concerns of social capital theory overlap very strongly with those of network theory. Research on the social
capital generated by groups in general goes back at least to the foundational work of Loury (1977; 1981), Bourdieu
(1986; Bourdieu and Wacquant, 1992) and Coleman (1990). The application to immigrant communities has a long
pedigree in sociology. In economics, a number of recent papers have stressed the role of networks/social capital
among immigrants. In particular, see the work of Borjas (Borjas and Bronars, 1991; Borjas and Trejo, 1991; Borjas,
1992; 1993; 1994b; 1995; 1998), and Lazear (Lazear, 1999; 2000).
~ 71 ~
environments. In some sense, once such a bridge has been constructed, the need for additional
migrants might well be expected to decline.
Unlike transactions costs that emerge through simple lack of knowledge, those related to
asymmetric information, imperfect enforcement of contracts, and opportunism create a more
fundamental role for networks.128 In an environment characterized by these problems, the
opportunity for mutually beneficial trades may be foregone (Anderson and Young, 2006). In the
limit, these problems can cause the collapse of markets. This, in turn, creates an opportunity for
non-market (or ―market replacing‖) institutions; which, of course, is the opening wedge for
Williamson‘s (Williamson, 1975; 1985; 1996) Nobel prize winning development of transaction
cost economics. However, independently of transaction cost economics‘ emphasis on the role of
asymmetric information and opportunistic behavior in understanding the creation and operation
of firms; anthropologists, sociologists and historians used essentially the same factors in
explaining the role of ethnic networks and disasporas in the organization of trade across political
jurisdictions or, more generally, in the absence of effective protection of contractual/property
rights (Polanyi, 1957; Geertz, 1963; Polanyi, 1968; Cohen, 1969; 1971; Bonacich, 1973; Geertz,
1978; Curtin, 1984). More recently the analytical structures of transaction cost economics
(Landa, 1981; 1994) and game theory (Greif, 1989; 1991; 1993; 1997; Dixit, 2003a; b; 2004;
2009) have provided more formal frameworks for examining these relationship-based trade links.
The basic idea here is that ties of trust, and social capital more generally, built up among coethnics in the migration process can substitute for imperfect contract enforcement (whether a
function of incomplete contracts or lack of effective judicial systems). The enforcement
mechanism in this case is exclusion from the social and economic benefits of the
community/network.129 As with the case of transaction costs deriving from informational
problems, where migrants engage in market creation, we would expect contracting problems to
be most severe in the case of goods for which a deep, arms-length market does not exist.
However, unlike that case, where we might expect the need for a weak-link to decline once the
information bridge has been built; as long as the contracting problem remains in a given market,
the need for the contract enforcement role of the network will remain in place. Furthermore, to
the extent that the role of the ethnic community declines with successive generations, we might
even expect a need for continuing flows of migrants to support that role.
128
As Rauch (2001) points out, effective networks need not be immigrant or ethnic networks. Any group of people
that share information and are related by bonds of trust, the violation of which are costly to members of the network,
can serve at least a well. However, immigrant/ethnic networks have served this purpose historically and, unlike ―old
school tie‖ networks, they are relatively easily identifiable at the aggregate level.
129
While economists tend to stress exclusion from economic benefits (e.g. Greif, 1993), one of the reasons that
ethnic communities play such an important role here (rather than simply repeated interaction of more-or-less
randomly generated networks) is the broader role of social solidarity. This social solidarity is often linked to
distinctiveness relative to the native community induced via common language and religion, as well as ghettoization
and endogamy. Thus to be excluded from the community implies substantially higher costs than simple exclusion
from trading networks. Epstein and Gang (2006) develop an interesting analysis of the tension between the benefits
of the social network and those of assimilation in the context of a model of international trade.
~ 72 ~
Before turning to a discussion of the empirical work on the role of immigrant networks in
reducing trade costs, we should note that, in addition to the role of networks, the most
straightforward way that immigrant differences might affect trade patterns runs through
preferences—immigrants may have a preference for their own goods that they bring with them
when they emigrate.130 Not only does this have a direct effect on demand for the immigrantpreferred goods, but we would also expect that demonstration effects would increase the demand
for these goods among natives as well. Given that non-immigrants from a given country (i.e.
natives and immigrants from other countries) will generally dramatically outnumber immigrants
from a given country, we might expect the indirect effect to be larger than the direct effect. It is
conventional in the empirical literature to assert that taste effects should affect only imports, and
among imports only consumer goods. While this may be a plausible approximation, it is surely
the case that information gleaned by immigrants from consuming in the host country can be
transferred to the home country in a variety of ways. Thus, the common inference in the gravity
literature that a positive estimated effect of immigrant stock on imports is evidence of a
preference effect, while a positive effect on exports is evidence of network effects, seems less
than strong. By contrast, the presumption that the preference effect should be seen in consumer
goods seems quite well founded. In either case, when evaluating the link between immigration
and trade, we surely need to account for the effect of differences in preferences between
immigrants and natives.
Empirical work suggesting the presence of large border effects (McCallum, 1995; Helliwell,
1998) and missing trade (Trefler, 1995) has spurred extensive research on the role of trade (i.e.
transaction) costs as a source of these findings (Anderson, 2004; Anderson and VanWincoop,
2004), and networks as a response to these costs (Rauch, 2001; Combes et al., 2003). A standard
tool for evaluating the effects of such trade costs is the gravity model (see the Chapter in this
Handbook by Bergstrand and Egger for an extensive discussion of the use of gravity model in
trade modeling). Analysis using gravity models has provided strong support for the notion that
social and political differences, and poor enforcement of contractual rights, act as barriers to
trade.131 We are particularly interested here in the evidence of the role of immigrant networks in
alleviating these transaction costs. Gravity modeling of trade, with the variables extended to
include a migration variable, takes the form
130
Most of the theoretical research on the complements v. substitutes questions abstracts from taste differences by
assuming globally common, homothetic preferences. Once we permit either systematically different preferences or
heterogeneity/monopolistic competition, the analysis becomes more complex. In the HOS world, the obvious
assumption is that natives have a strong preference for their exportable commodity (thus immigrants carry a stronger
preference for the exports of their home country, increasing the host country‘s demand for imports from the
immigrant‘s home); but this pattern of preferences can yield the Opp, Sonnenschein, Tombazos (2009) ―reverse
Rybczynski‖ effect. Similarly, once we enter the world of country-specific varieties of goods, we are in a world
where results are sensitive to details of market structure (Ethier, 1996).
131
For cultural differences, gravity models have used: language (Boisso and Ferrantino, 1997; Hutchinson, 2002;
2005); and broad measures of cultural difference (Guiso et al., 2009). A number of papers have used measures of
rule of law and other institutions to get at the costs associated with poor enforcement of contracts (Anderson and
Marcouiller, 2002; de Groot et al., 2004; Berkowitz et al., 2006; Turrini and van Ypersele, 2006; Nunn, 2007;
Ranjan and Lee, 2007; Leeson, 2008; Li and Samsell, 2009).
~ 73 ~
xijt mijt Gijt ijt ijt ,
(49)
Where xitj is the value of dyadic trade (exports or imports) between partner country i and
reference country j at time t, Gijt is a matrix of standard gravity variables (e.g. reference and
target country GDP, distance, and other ―trade cost‖ variables), λijt is a matrix of fixed effects,
and ε is an error term.132 The parameter of interest in this work is α. Since these models are
commonly estimated in logs, this can be interpreted as estimates of the elasticity of trade volume
with respect to immigration.133
The seminal paper here is Gould‘s (1994) study of the effect of immigrants on trade between the
US and 47 trading partners that were also sources of US immigrants, for the years 1970-1986. In
addition to estimating a gravity model, extended to include stocks of immigrants from the
foreign country residing in the US, for bilateral aggregate imports and exports; Gould also
estimated separate regressions for imports and exports of producer and consumer goods. With
respect to aggregate imports and exports, Gould found immigrants increased trade (though at
lower levels than much of the later literature); and, somewhat unusually given later results, found
a larger effect on exports than on imports. The usual inference from this pattern is that
preference effects explain the difference between the import effect and the export effect (since
the network effects are apparently taken to be symmetric). Thus, this is taken as evidence against
a significant role for preference effects. When the analysis was done on consumer and producer
goods separately, Gould found the effect on consumer goods was larger for both imports and
exports. Gould‘s presumption was that consumer goods are more differentiated than producer
goods, and took this as evidence of network effects.134
132
Most of these papers have a single reference country, which is the host country for the immigrants from various
home countries. As we note below, in most papers the reference country is the US.
133
Starting with Wagner, Head and Ries (2002), a number of papers have contained tables reporting estimates of
these elasticities in previously published papers. However, given the range of specifications, countries analyzed,
years, and estimation techniques, the value of such an exercise is less than clear. Since, in all of these tables, each
paper is represented by a single pair of elasticities (one for exports, one for imports), the goal of the authors of the
tables is usually to pick the most ―comparable‖ specifications; but, since the point of many of the papers is precisely
different specifications, this seems an odd choice. On the other hand, reporting elasticities from widely different
specification and estimation techniques would make little sense.
134
There are two somewhat unusual elements of Gould‘s framework. The first is the use of a specific functional
form for the effect of immigrants on transaction costs which is decreasing at a decreasing rate (also used by Mundra,
2005). While this permits him to estimate the point at which the positive effect of immigrants on trade begins to
decline, it is also apparently responsible for the sizable difference between Gould‘s results and those of other work
with otherwise similar specifications. In the event, Gould finds that the effect of immigrants on exports is exhausted
at a quite small level (12,016 immigrants), while the effect on imports is exhausted at a substantially larger level
(370,879 immigrants). The second peculiarity, which a small number of other papers apply, is the use of average
length of stay for a given country‘s immigrants—in both a linear and a quadratic term. As in the other papers that
use these variables, the effects tend to be small. This is especially the case for the quadratic term, with the result that
most papers end up excluding both of these variables, or including only the linear term. More problematically, it is
not clear what this variable is really supposed to measure in terms of networks and information. In neither the
market creation case nor the market replacement case, as long as the networks are in place, is there any reason why
average length of stay should matter.
~ 74 ~
Building on Gould‘s original work, a sizable literature of gravity-based estimates of the effect of
migration on trade has developed. The single most studied reference country is the US (Dunlevy
and Hutchinson, 1999; Hutchinson and Dunlevy, 2001; Co et al., 2004; Herander and Saavedra,
2005; Mundra, 2005; Dunlevy, 2006; Millimet and Osang, 2007; White, 2007b; Bandyopadhyay
et al., 2008; Tadesse and White, 2008; White and Tadesse, 2008b; a; Jansen and Piermartini,
2009; White, 2009; Tadesse and White, 2010); but there are also analyses featuring Canada
(Helliwell, 1997; Head and Ries, 1998; Ching and Chen, 2000; Wagner, Head and Ries, 2002;
Jiang, 2007; Partridge and Furtan, 2008); the UK (Girma and Yu, 2002; Ghatak et al., 2009);
Switzerland (Kandogan, 2009; Tai, 2009); Germany (Bruder, 2004); Denmark (White, 2007a);
France (Briant et al., 2009); Spain (Blanes-Cristóbal 2004; 2005; 2008); Greece (Piperakis et
al., 2003); Italy (Murat and Pistoresi, 2009); the EU 15 (Parsons, 2005); Australia (White and
Tadesse, 2007); New Zealand (Bryant et al., 2004); and Malaysia (Hong and Santhapparaj,
2006).135 Very broadly, and with very few exceptions, these papers consistently find significant
positive effects of immigration on trade—whether measured as imports or exports. Furthermore,
of the papers that report results for both imports and exports, it was about twice as common to
find the estimated effect of immigration on imports greater than that on exports. Again, this is
taken as evidence that preference effects and network effects are both operating.
There are a few closely related papers that should be mentioned in this context. The first is Rauch and Trindade‘s
(Rauch and Trindade, 2002) important paper on the role of Chinese communities in trade. Rather than looking at the
effect of immigration from a home country on the trade of a host country, Rauch and Trindade ask if the stock of
Chinese in each country affects trade in a dyad. Chinese communities are well-known in the ethnographic and
business literatures as actively involved in trade (e.g. Landa, 1994; Weidenbaum and Hughes, 1996; Liu, 2000;
2001). Thus, Rauch and Trindade‘s interest in the presence of Chinese immigrant communities in explaining trade
in a gravity framework makes a lot of sense. In addition, the authors use Rauch‘s (1999) distinction between
standardized goods (goods with reference prices), goods traded on organized exchange, and differentiated goods,
finding that the effects of Chinese communities on the latter two categories are economically and statistically more
significant than on standardized goods. Given the other controls, the authors take this as evidence that Chinese
communities provide both market making and market replacing services to the countries in which they reside.
A second related paper is Combes, Lafourcade and Mayer‘s (2005) analysis of the effect of migration between
French départements on trade between those départements. While the analysis uses strictly domestic data, the issues
of theoretical and empirical implementation are identical to the international case. This paper is particularly notable
for the care it takes in developing both a theoretical framework and its explication of the empirical framework. This
paper develops data and analysis considering both immigration networks and networks of firms, ultimately finding
both to be economically and statistically significant. As with Gould, the effect of immigrant networks is greater on
exports than it is on imports. Millimet and Osang (2007) examine the relationship between intranational trade and
intranational migration for the case of the US, though this paper is primarily interested in analyzing the border
effect. As in Combes, Lafourcade and Mayer, Millimet and Osang‘s results strongly support a positive relationship
between trade and migration. Another paper using sub-national data on trade and immigration is Helliwell‘s (1997)
analysis of intra-provincial, intra-state and international (US-Canadian) trade and migration. Like Millimet and
Osang, Helliwell‘s main interest is in the border effect, but he also finds strong evidence of a positive link between
trade and migration.
Finally, a paper by Blanes- Cristóbal and Martin-Montaner (Blanes-Cristóbal and Martín-Montaner, 2006)
examine the effect of migration on intra-industry trade. Given the usual interpretation of intra-industry trade in
terms of monopolistic competition, this seems a natural development of Rauch‘s (Rauch, 1999) analysis of
differentiated products. While this paper does not apply gravity methods, the results are broadly consistent with the
results of those papers that do. That is, at least for Spain, immigration is strongly, positively associated with intraindustry trade.
135
~ 75 ~
In addition to aggregate imports and exports, a number of papers also estimated separate
regressions for various categories of commodities: consumer and producer goods (Gould, 1994;
Blanes-Cristóbal 2004; Herander and Saavedra, 2005; Mundra, 2005; Blanes-Cristóbal 2008;
Kandogan, 2009); Rauch‘s (1999; Rauch and Trindade, 2002) categories (White, 2007a; White
and Tadesse, 2007; Briant, Combes and Lafourcade, 2009); intra-industry trade and interindustry trade (Blanes-Cristóbal 2005); manufactured and non-manufactured goods (BlanesCristóbal 2005; White and Tadesse, 2007); cultural and non-cultural goods (Tadesse and White,
2008; White and Tadesse, 2008b; Tadesse and White, 2010); and various product-specific
disaggregations (Dunlevy and Hutchinson, 1999; Hutchinson and Dunlevy, 2001; Jiang, 2007;
Kandogan, 2009; Tai, 2009). These papers attempt to identify the category of commodity that is
most likely to be characterized by product differentiation and, thus, information problems, e.g.:
consumer goods; differentiated good & products traded on an organized exchange; intra-industry
trade; manufactured goods; and cultural goods. The hypothesis is that these goods will be traded
less, so immigrants will improve their tradability more. In addition, goods are differentiated by
category of trading partner: by common colonial past (Girma and Yu, 2002; Blanes-Cristóbal
2004; 2008); goods differentiated by per capita income of the exporter (Co, Euzent and Martin,
2004; White, 2007b; 2009); by whether the trading partner is an old or new market (Murat and
Pistoresi, 2009); or by cultural similarity (proxied by language in many papers). Commodities
from more ―foreign‖ trading partners should be traded less and, thus, immigrants should improve
their tradability more. While these variables might be tapping the need for either market creation
or market replacement, papers that use variables measuring (Dunlevy, 2006) corruption or
institutional quality (Briant, Combes and Lafourcade, 2009) are directly related to the market
replacing role of immigration. In both cases, the usual strategy is either to estimate separate
regressions across category and compare coefficients, or to interact a dummy for the category
with the immigrant stock measure. Across categories and specifications, the results are broadly
consistent with the expected outcomes.136 That is, more differentiated goods and more foreign
countries tend to be associated with greater trade creation from immigration. Again, this is taken
as consistent with one of the information stories (market creating or market replacing) and
providing less support for the preference effect of immigration.
A number of papers have taken advantage of the existence of trade and migration data collected
at subnational levels: Canadian provinces (Helliwell, 1997; Wagner, Head and Ries, 2002;
Partridge and Furtan, 2008); French départements (Combes, Lafourcade and Mayer, 2005;
Briant, Combes and Lafourcade, 2009); and U.S. states (Bardhan and Guhathakurta, 2004; Co,
Euzent and Martin, 2004; Dunlevy, 2006; Millimet and Osang, 2007; Bandyopadhyay, Coughlin
and Wall, 2008; Tadesse and White, 2008; White, 2009; Tadesse and White, 2010). The first
136
One really distinctive approach should be mentioned. In a currently unpublished paper, Jiang (2007) argues that
the presence of fixed trade costs (associated with what we have called the market creation role immigration) can be
identified from their effect on the extensive margin of trade, while the variable costs (associated with what we have
called the market replacing role of immigration) will affect both margins. Using Canadian data, for 1988-2004,
Jiang finds that migrants primarily affect the extensive margin and, thus, the fixed costs.
~ 76 ~
benefit of using sub-national data is that it permits the analysis to focus on more specifically
defined geographic regions, thus achieving greater precision in estimation. A related benefit is
that analysts can control for national level common determinants of trade and migration using
country-level fixed effects, but still retaining sub-national level variation for identifying the
effect of migrants. A particularly interesting paper in this group is Herander and Saavedra‘s
(2005), which attempts to identify the relative effects of both state- and national-level migrant
stocks. Consistent with the motivation for all of these papers, Herander and Saavedra find strong
evidence that the local effects are larger than the national effects. This suggests that, whether
they are mainly market creating or market replacing, network links are about proximity.
Herander and Saavedra also test for whether size of previous immigrant stock reduces the effect
of current immigrants on trade flows. Consistent with Gould‘s result, these authors find that
previous immigrant stock does reduce the effect of current immigrants. Given the discussion
above (i.e. that market creating networks should experience such a decline, while market
substituting links do not), this would appear to be strong evidence in favor of the relatively
greater importance of market creation.
To summarize: there is strong and consistent support for immigration having a positive effect on
trade; that link appears to be stronger for commodities whose trade is likely to involve
informational problems; and that link appears to be stronger for trade with countries that are
different from the reference country on a number of dimensions; and that link appears to be
stronger when the partner country is characterized by institutional problems.137 This would seem
to be strong evidence for the network story. However, since these analyses are never carried out
in the context of a structural analysis that permits an evaluation of the relative price effects that
drive the general equilibrium analysis standard in the trade theoretic accounts, these results
neither permit comparison with the trade theoretic claims, nor do they speak directly (or
unambiguously) to the issues of whether trade and migration are substitutes or complements.
5.2. Political structuring of migration: Community, Illegality and Welfare State Effort
The previous section focused on the social aspect of the act of migration itself. This issue
naturally emphasizes social relations within the community of migrants. In this section, by
contrast, we focus on the social relations between the community of immigrants and that of
natives. We briefly note three specific aspects of this relationship: the ―foreignness‖ of
immigrants affects natives‘ sense of who they are as a community; the act of fixing legal limits
on the number of immigrants below the free migration level creates a need to spend real
resources to enforce those limits and creates a class of illegal immigrants; and the presence of a
redistributive welfare state in all major immigrant host countries creates yet another margin on
which immigration might affect native welfare. Given their potential impact on native welfare,
like effects on relative wages and unemployment, each of these forms the basis of political
137
Corruption and low institutional quality would, presumably, also be a problem for the reference country. There is
essentially no evidence of this side of the link given that virtually all of the reference countries are characterized by
globally quite high institutional quality.
~ 77 ~
mobilization on the immigration question. This section comments briefly on the direct analysis
of these issues, the next section briefly discusses political economic analyses of immigration.
Immigrants generally differ on a number of dimensions from natives. Most economic research
focuses on economically relevant differences (i.e. individual factor endowments--usually taken
to be some measure of skill). However, even the most cursory reading of the history or
immigration should make it clear that other dimensions of difference can also matter a great deal
(Jones, 1992a; Reimers, 1998). Similarly, the emergence of radical right parties in Europe has
been strongly associated with anti-immigrant politics that can only very partially be explained by
economic effects of that immigration (Kitschelt and McGann, 1995; Marcus, 1995; Betz, 1998;
Beirich and Woods, 2000; Betz, 2001). ―Foreigners‖ make a particularly attractive target for
more-or-less unfocussed anger in the context of general economic difficulties. Thus, while it is
surely true that attitudes toward immigrants are affected by understandings of labor market
effects, recent research suggests that these effects are dwarfed by social concerns (Citrin et al.,
1997; Dustmann and Preston, 2007; Card et al., 2009). Card, Dustmann and Preston (2009) refer
to these social concerns as ―compositional amenities‖. Given the overall conclusion of empirical
research on labor market effects of migration, and the increasingly heated public politics of
immigration, the centrality of such compositional amenities should not surprise us.
Illegality is also directly related to the ―foreignness‖ of immigrants. Virtually all of the
economic analysis we have reviewed to this point proceeds under the assumption that
governments can fix immigrant flows perfectly—this is as true of trade theoretic analyses as it is
of labor economic research that treats immigrants as inelastically supplied to the labor market.
Governments certainly do attempt to fix the level of immigration flows, but (unless such policies
are perfectly effective) the act of trying to fix quantities in a world with dramatic differences in
the returns to work creates a large inducement to migrate and, as a consequence, creates the
status of illegal immigrant. This, in turn, requires governments to spend real resources in an
attempt to regulate immigration. Not surprisingly, there is a large literature on illegal
immigration in both demography and economics dealing with such issues as the choice between
legal and illegal migration, counting the number of illegal immigrants, the labor market effects of
illegality, and the effectiveness of various policies to restrict illegal migration.138 Much rarer are
attempts to embed analyses of illegal immigration in standard general equilibrium models. An
important first effort in this direction was made by Wilfred Ethier (1986a; b).139 Ethier develops
a one-sector model with legal and illegal immigration to analyze how border and internal
enforcement affect national income and income distribution (among skilled and unskilled native
workers), as well as the fiscal consequences of such policy.140
138
Hanson (2006) is an excellent guide to the main issues, with a specific focus on the Mexican case.
Although we do not cover the issue in this survey, Ethier (1985) also produced an interesting analysis of
temporary migration in which immigrants respond to an economy characterized by stochastic shocks.
140
Bond and Chen (1987) and Djajic (1997) extend Ethier‘s analysis to the case of a two-sector economy—Bond
and Chen permit international capital mobility, while Djajic considers a long-run when skill distribution of workers
139
~ 78 ~
All industrial countries (the major host countries for migration) maintain more-or-less extensive
welfare states that provide some combination of income support (―citizen wage‖) and direct
provision of goods (―decommodification‖, e.g. housing, health care, education). These policies
were created, and are generally justified, as a right of citizenship—i.e. a necessary component of
a good community. Some such justification is necessary since welfare state provision is
inherently redistributive. The level of such provision is controversial even in the context of a
relatively homogeneous community, but it is dramatically more controversial in the face of large
immigration flows. Part of the difficulty stems from the rights of non-citizens, or ―foreigners‖
(on some politically relevant dimension) even if a citizen, to these community goods. This is an
extension of the ―compositional amenity‖ issue that we have already commented on.141 The
literature on the fiscal effects of immigrants focuses on the fact that immigrants have
implications for both the expenditure and revenue sides of the welfare state. If, as much of the
theoretical literature presumes, immigrants are younger, poorer, and have more children than
natives, their pattern of consumption of services and contribution to the welfare state will differ
from those of natives. In particular, the usual presumption is that welfare states in most
relatively wealthy countries involve net transfers from natives to immigrants. This presumption
is undermined, to some extent, by two factors: the actual pattern of immigration; and the
valuation of lifetime effects. Most countries are not characterized simply by a large shock of
young, poor immigrants. The US, for example, is characterized by U-shaped immigration (i.e.
most of the immigration is in the two tails of a distribution defined by skills). Studies that
attempt to evaluate the current fiscal effect of immigrants deal with this problem explicitly
(Rothman and Espenshade, 1992; Borsch-Supan, 1994; Espenshade and Huber, 1998; Lee and
Miller, 1998; MaCurdy et al., 1998; Nannestad, 2007). The overall result of these studies is that
immigrants receive net transfers from natives via the welfare system.142 However, a complete
evaluation of these effects requires a dynamic, general equilibrium perspective that evaluates the
long-term fiscal effects of immigration. The effects identified in these studies tend to be smaller
and less certain, but the qualitative pattern is more-or-less the same (Auerbach and Oreopoulos,
1999; 2000; Storesletten, 2000; 2003).
5.3. The Peculiar Political Economy of Immigration
responds endogenously to immigration. Bucci and Tenorio (1996) use Ethier‘s model to examine the fiscal effects
in more detail. Yoshida and Woodland (2005) collects a number of the authors‘ articles that extend Ethier-type
models in a number of these directions. Carter sticks with the one sector model, but considers labor market
distortions created by efficiency wages (Carter, 1999) and segmented labor markets (Carter, 2005).
141
There is a large philosophical literature on citizenship and immigration that is quite relevant to welfare analysis,
but is beyond the scope of this review.
142
It is important to note that, controlling for observable characteristics, immigrants rate of use of the welfare state is
not higher than that of natives. Rather, immigrants, relative to natives, have traits that involve greater current
transfers—i.e. they are young, poor, and have relatively more children than citizens.
A different issue is whether immigrants are attracted to locations as a result of generosity of welfare systems.
This is the ―welfare magnet‖ hypothesis. The link between welfare provision and immigration is a mainstay of open
economy public finance theory (e.g. Wildasin, 1991; 1994; Brueckner, 2000; Myers and Papageorgiou, 2000). The
empirical results here are quite mixed, clustering around finding of no effect to small positive effects (Barrett and
McCarthy, 2008).
~ 79 ~
Political economy research generally proceeds relative to some "good" policy outcome,
deviations from which are explained by 'political economy' forces. For economists, this 'good'
outcome is the welfare optimum; for political scientists, it is the democratic optimum. The, usual
villain, for both, is ‗special interests‘ (though early pluralist theory saw lobbying as a way of
conveying information about preference intensity rather than distorting outcomes from the
democratic optimum). For the case of immigration, what these optima are is so fraught that most
work leaves them implicit.143 While nothing like as extensive as research on the political
economy of trade, there is a very lively literature on the political economy of immigration.
Much, perhaps most, of the recent work has focused on identifying the preferences of citizens, a
small amount has sought to model equilibrium outcomes as a function of factor-price effects, and
a larger sub-literature has focused on the political economic link between immigration and
welfare state provision. We comment briefly on each of these.
It should be clear from the work surveyed in section 2 that it is a straightforward task to derive
the effects of immigration on relative wages. Under otherwise standard assumptions, the
essential assumption for generating certain redistributive effects is that the number of factors of
production should exceed the number of sectors. Among others, this will be the case in onesector models with many types of labor and in specific-factor models (Bilal et al., 2003). Since
factor market effects play a large role in political economy modeling, it is not surprising that a
substantial amount of effort has gone into finding evidence of such effects. The current approach
to doing this is to use individual responses in public opinion polls on questions relating to
immigration policy along with information on individual skill endowments to ―test‖ for
consistency between model predictions and individual evaluations. For this purpose,
endowments are usually considered as more- and less-skilled labor, and measured by education.
In this approach, it is common to find that individual preferences on immigration policy are
determined, at least in part, by endowment (Scheve and Slaughter, 2001; Mayda, 2006; O'Rourke
and Sinnott, 2006). While this seems sensible, there are at least two problems: first, if the
findings of research on the labor market effect of immigration are correct (i.e. that the labor
market effects are small to zero, even on unskilled natives), it is not clear what we should make
of the results from opinion polls; and, second, it seems likely that, in addition to its relationship
to labor market status, education is related to things like cosmopolitanism that affect tolerance, or
to training in economics that predisposes people to more Liberal attitudes on globalization in
general and immigration in particular (Hainmueller and Hiscox, 2007). As the previous section
noted, another channel via which immigration affects native economic interests is the welfare
state/fiscal redistribution channel. Recent research on individual attitudes that seeks to take such
considerations into account is characterized by mixed results. For example Facchini and Mayda
(2009) find that, while both labor market and redistributive effects are significant, the latter are
stronger; but Hainmueller and Hiscox (forthcoming) find that neither if these channels are
143
For economists this is a bit easier since every model has a welfare optimum. However, since the usefulness of
this optimum (usually some version of free mobility) is highly contested, we still tend to steer away from explicit
discussion. See Greenaway and Nelson (2005) for more on this.
~ 80 ~
unambiguously supported. Finally, as we noted above, while labor market effects (to the extent
that they can be effectively identified with education-based endowments) and redistributive
effects surely matter, there is evidence that compositional amenities/social interaction effects
may be even more important (Citrin, Green, Muste and Wong, 1997; Dustmann and Preston,
2007; Card, Dustmann and Preston, 2009).144
While the findings of research on both labor market effects and citizen attitudes are such as to
lead us to doubt that such effects are the primary causal factor in determining immigration
policy, there is still a significant literature seeking to analyze immigration policy in precisely this
way. As in the literature on the political economy of international trade, there are two broad
classes of political institution that are considered in solving for political economic equilibrium:
referendum models; and lobbying models. It is probably most useful to think of the single issue
referendum model as a reduced form for considering the general effect of public preferences on
immigration policy.145 Black‘s (1948) median voter theorem, combined with the auxiliary
assumptions that the immigration issue is one-dimensional (e.g. size of quota) and the
preferences identified by factor ownership are single-peaked over that dimension, yields a simple
prediction about the link between preferences and political outcomes (e.g. Benhabib, 1996;
Flores, 1997; de Melo et al., 2001).146 A small number of studies have attempted to frame
accounts of contemporary immigration policy outcomes in these terms (de Melo, Miguet and
Muller, 2004; Facchini and Mayda, 2008; Miguet, 2008). In addition, Goldin (1994) and
Timmer and Williamson (1998) frame accounts of late-19th early 20th Century U.S. immigration
policy in these same terms. It is also possible to rationalize policy via lobbying models
(Amegashi, 2004; Facchini and Willmann, 2005; Schwellnus, 2008), and systematic empirical
work is presented suggesting consistency between immigration policy outcomes and the
predictions of these models (Facchini and Mayda, 2008; Facchini et al., 2008). The Facchini and
Mayda (2008) paper is particularly interesting in its presentation of both referendum and
lobbying model and an attempt to provide a link between these two modes of policy
determination. A fundamental problem with the lobbying models is that, unlike lobbying on
144
This last point is related to the question of whether negative attitudes are causally linked to proximity to large
numbers of immigrants. The results on this question are mixed: Scheve and Slaughter (2001) find no evidence of
such links, while Gang, Rivera-Batiz and Yun (2002) and Hanson, Scheve and Slaughter (Hanson et al., 2007) do
find such effects.
145
Unlike international trade, immigration policy is quite often an issue of general public political discourse.
Furthermore, genuine referenda on the issue have occurred: 1994‘s proposition 187 in California (Calavita, 1996;
Tolbert and Hero, 1996; MacDonald and Cain, 1997; Alvarez and Butterfield, 2000; Lee et al., 2001); while in
Switzerland immigration was a continuing issue in electoral politics in the 1990s (de Melo et al., 2004; Miguet,
2008). While deMelo et al. and Miguet argue that Swiss electoral politics and outcomes are consistent, broadly
speaking, with factor market-based preferences, the research on proposition 187 tends to argue that labor market
effects are strongly dominated by broader social attitudes.
146
While it is probably easiest to conceive of immigration policy in terms of number of migrants, as our brief
discussion of enforcement issues suggests, there is a parallel political economy dealing with illegal immigrants.
Standard theoretical political economy models have been developed (Hillman and Weiss, 1999; Nelson and Xu,
2001) to analyze enforcement activity, and empirical analyses suggest a role for political economic forces in
determining those policies (Shughart et al., 1986; Dávila et al., 1999; Hanson and Spilimbergo, 2001).
~ 81 ~
trade policy, the actual patterns of lobbying are not particularly consistent with the predictions of
the model. While there certainly are influential economic interests involved in lobbying (e.g.
western agricultural interests), these groups do not reflect the broad, economy-wide interests
implied by claims about national level labor market effects. Instead, national level groups tend
to be religious and environmental (Gimpel and Edwards, 1999). Ultimately, for all the
convenience in linking the material conditions of the economy to political outcomes, the
empirical weakness of the core relationship between immigration and labor market outcomes
renders the claims of this line of research deeply problematic.147
The presence of a redistributive welfare state can change both the welfare optimum and
individual political economic calculation (Wildasin, 1994; Wellisch and Wildasin, 1996;
Wellisch and Walz, 1998; Gatsios et al., 1999; Razin and Sadka, 2001; Razin et al., 2005). The
basic question addressed by this body of research is clear: does admitting immigrants (especially
poor immigrants) lead to a reduction in welfare state effort? The overwhelming majority of
papers on this topic use some version of a referendum as the political economic mechanism, and
assume that immigrants receive immediate access to full welfare state benefits. In addition, most
work on this topic also assumes that immigrants receive immediate access to the franchise.
Given the well-known problems with spatial voting models in higher dimensions, these models
all rely on relatively special assumptions about sequencing of votes on issues and admission.
Partly as a result of such structure, and partly given the mix of static and dynamic structures, the
theoretical models yield a large range of results (Cukierman et al., 1994; Mazza and van Winden,
1996; Scholten and Thum, 1996; Flores, 1997; Cremer and Pestieau, 1998; Haupt and Peters,
1998; Michel et al., 1998; Razin and Sadka, 1999; 2001; Kemnitz, 2002; Razin et al., 2002;
Hansen, 2003; Haupt and Peters, 2003; Dolmas and Huffman, 2004; Leers et al., 2004; Thum,
2004; Mayr, 2007; Facchini and Mayda, 2008). What little systematic empirical research exists
on this topic tends to find that increased immigration from relatively poor countries is associated
with lower public support for the welfare state and lower welfare state effort (Razin, Sadka and
Swagel, 2002; Hanson, Scheve and Slaughter, 2007; Facchini and Mayda, 2008; Eger, 2010).148
Unlike the case of trade, it turns out to be considerably more difficult to rationalize immigration
policy in terms of straightforward models that run from factor ownership to preferences over
policy to policy outcomes. It seems an unavoidable conclusion that the social fact of immigrant
differences from the native community plays a major role in the determination of individual
attitudes and the politics of immigration. We have already commented several times on the role
of these compositional externalities on preferences. We close this section by taking note of an
interesting research program developed by John Roemer and colleagues that seeks to explicitly
build these considerations into formal political economy models (Roemer and Van der Straeten,
147
Gaston and Nelson (2000) and Greenaway and Nelson (2005) develop this argument at greater length.
This is consistent with the fact that the standard result in closed economy models of redistribution that greater
inequality should be associated with a bigger/more redistributive state (Meltzer and Richard, 1981) is consistently
and decisively rejected in virtually every attempt to evaluate the model (Harms and Zink, 2003; Alesina and Glaeser,
2004).
148
~ 82 ~
2005; Lee and Roemer, 2006; Lee et al., 2006; Roemer and Van der Straeten, 2006; Roemer et
al., 2007). This is hardly the last word on the political economy of immigration policy, but it is
does suggest a promising avenue for both theoretical and empirical research in the future. One
way of teasing out the distinctive elements of immigration policy is via explicit comparison to
trade policy (Greenaway and Nelson, 2006; Hatton and Williamson, 2007; Mayda, 2008b;
Greenaway and Nelson, 2010).
6. Conclusions
When it comes to the impact of immigration, trade theory under the empirically most plausible
assumptions yields a fairly tight prior on an essentially zero labor market impact. As for the
empirical literature, it is widely agreed that there are non-trivial negative effects on migrants of
the same origin and vintage, and, perhaps not quite so widely held, agreement that the small, and
shrinking, group of native high school dropouts experience statistically significant, but
economically modest, negative consequences from contemporary immigration. Otherwise,
evidence of negative effects is largely absent. In fact, aggregate welfare effects seem likely to be
positive.
To the extent that there is a dispute in the immigration case, it revolves around the framework to
be used for evaluating the results of the empirical work. The main substantive difference
between labor and trade economists relates to the dimensionality of the model used to evaluate
the results - with labor economists preferring an m-factor × 1-final good model and trade
economists preferring an m × n good model (with a modal preference for the 2 × 2 model). As
long as m 2 and n 2, output-mix adjustment will play a role in adjusting to an immigration
shock, and the failure to account for that role will produce over-estimates of the wage (or
unemployment) effects of any given shock. Furthermore, we have also argued for the
fundamental plausibility of the m-factor n-good model on essentially a priori grounds. If this
argument is accepted, there is some presumption that output-mix adjustment fully absorbs the
immigration shock and that factor price insensitivity holds.
This inevitably leads us to the most difficult question: if immigration is really not relevant to the
long-run economic life of citizens, why does it occasionally become such a large political
issue?149 We have argued that compelling answers to these questions must involve analysis
beyond simple factor arbitrage models. Specifically, it is essential to consider the social and
political context in which immigration takes place. While we have begun to see serious work
here, as section 5 suggests, these latter constitute a fruitful area for further research.
149
This question is raised in Gaston and Nelson (2000) and analyzed in more detail in Greenaway and Nelson
(2010).
~ 83 ~
References
Abowd, John M. and Richard B. Freeman (1991). ―Introduction and Summary‖. In J. M. Abowd
and R. B. Freeman eds, Immigration, Trade and the Labor Market, Chicago: Chicago
University Press/NBER, pp. 1-25.
Addison, T. and C. Worswick (2002). ―The Impact of Immigration on the Earnings of Natives:
Evidence from Australian Micro Data‖. Economic Record, V.78-#240, pp. 68-78.
Akbari, Ather H. and Don J. Devoretz (1992). ―The Substitutability of Foreign-Born Labor in
Canadian Production: Circa 1980‖. Canadian Journal of Economics, V.25-#3, pp. 60414.
Alarcón, Rafael (1992). ―Norteñización: Self-Perpetuating Migration from a Mexican Town‖. In
J. Bustamente, R. Hinojosa and C. Reynolds eds, U.S.-Mexico Relations: Labor Market
Interdependence, Stanford: Stanford University Press, pp. 302-18.
Albert, Max and Wilhelm Kohler (1995). ―Factor-Price Equalization under Joint and Nonjoint
Production‖. Journal of Economics-Zeitschrift Fur Nationalokonomie, V.62-#3, pp. 27194.
Alesina, Alberto and Edward L. Glaeser (2004). Fighting Poverty in the US and Europe: A
World of Difference. Oxford: Oxford University Press.
Altonji, Joseph and David Card (1991). ―The Effects of Immigration on the Labor Market
Outcomes of Less-Skilled Natives‖. In J. M. Abowd and R. B. Freeman eds,
Immigration, Trade and Labor Market, Chicago: University of Chicago Press/NBER, pp.
Alvarez-Plata, Patricia; Herbert Brücker and Boriss Siliverstovs (2003). ―Potential Migration
from Central and Eastern Europe into the EU-15: An Update‖. Report for the European
Commission, DG Employment and Social Affairs, Berlin: German Institute for Economic
Research (DIW Berlin) #
Alvarez, R. Michael and Tara L. Butterfield (2000). ―The Resurgence of Nativism in California?
The Case of Proposition 187 and Illegal Immigration‖. Social Science Quarterly, V.81#1, pp. 167-79.
Amano, Akhiro (1977). ―Specific Factors, Comparative Advantage and International
Investment‖. Economica, V.44-#174, pp. 131-44.
Amegashi, J. Atsu (2004). ―A Political Economy of Immigration Quotas‖. Economics of
Governance, V.5-#3, pp. 255-67.
Anderson, James E. (2004). ―Trade and Informal Institutions‖. In E. K. Choi and J. Hartigan eds,
Handbook of International Trade, Volume II, Oxford: Blackwell, pp. 279-93.
Anderson, James E. and Douglas Marcouiller (2002). ―Insecurity and the Pattern of Trade: An
Empirical Investigation‖. Review of Economics and Statistics, V.84-#2, pp. 342-52.
Anderson, James E. and Eric VanWincoop (2004). ―Trade Costs‖. Journal of Economic
Literature, V.42-#3, pp. 691-751.
Anderson, James E. and Leslie Young (2006). ―Trade and Contract Enforcement‖. Contributions
in Economic Analysis & Policy, V.5-#1, pp. Article 30.
Angrist, Joshua D. and Adriana D. Kugler (2003). ―Protective or Counter-Productive? Labour
Market Institutions and the Effect of Immigration on EU Natives‖. Economic Journal,
V.113-#488, pp. F302-F31.
Antràs, Pol (2003). ―Firms, Contracts, and Trade Structure‖. Quarterly Journal of Economics,
V.118-#4, pp. 1375-418.
~ 84 ~
Auerbach, Alan J. and Philip Oreopoulos (1999). ―Analyzing the Fiscal Impact of U S
Immigration‖. American Economic Review, V.89-#2, pp. 176-80.
____ (2000). ―The Fiscal Effect of U S Immigration: A Generational Accounting Perspective‖.
In J. M. Poterba ed, Tax Policy and the Economy, Cambridge: MIT Press/NBER, pp.
123-56.
Aydemir, Abdurraham and George J. Borjas (2007). ―Cross-Country Variation in the Impact of
International Migration: Canada, Mexico, and the United States‖. Journal of the
European Economic Association, V.5-#4, pp. 663-708.
Bandyopadhyay, Subhayu; Cletus C. Coughlin and Howard J. Wall (2008). ―Ethnic Networks
and U.S. Exports‖. Review of International Economics, V.16-#1, pp. 199-213.
Banerjee, B. (1983). ―Social Networks in the Migration Process: Empirical Evidence on Chain
Migration in India‖. Journal of Developing Areas, V.17-#2, pp. 185-96.
Bardhan, Ashok D. and Subhrajit Guhathakurta (2004). ―Global Linkages of Subnational
Regions: Coastal Exports and International Networks‖. Contemporary Economic Policy,
V.22-#2, pp. 225-36.
Barrett, Alan and Yvonne McCarthy (2008). ―Immigrants and Welfare Programmes: Exploring
the Interactions between Immigrant Characteristics, Immigrant Welfare Dependence, and
Welfare Policy‖. Oxford Review of Economic Policy, V.24-#3, pp. 543-60.
Barro, Robert J. and Xavier Sala-i-Martin (1991). ―Convergence across States and Regions‖.
Brookings Papers on Economic Activity, 1, pp. 107-82.
Bartel, Ann P. (1989). ―Where Do the New United States Immigrants Live‖. Journal of Labor
Economics, V.7-#4, pp. 371-91.
Bartel, Ann P. and Marianne J. Koch (1991). ―Internal Migration of U.S. Immigrants‖. In J. M.
Abowd and R. B. Freeman eds, Immigration, Trade, and Labor Markets, Chicago:
University of Chicago Press/NBER, pp. 121-34.
Bauer, Thomas and Klaus F. Zimmermann (1997). ―Network Migration of Ethnic Germans‖.
International Migration Review, V.31-#1, pp. 143-49.
Bean, Frank D.; B. Lindsay Lowell and Lowell J. Taylor (1988). ―Undocumented Mexican
Immigrants and the Earnings of Other Workers in the United States‖. Demography, V.25#1, pp. 35-52.
Beirich, Heidi and Dwayne Woods (2000). ―Globalisation, Workers and the Northern League‖.
West European Politics, V.23-#1, pp. 130-43.
Benhabib, Jess (1996). ―On the Political Economy of Immigration‖. European Economic
Review, V.40-#9, pp. 1737-43.
Berger, Mark C. (1985). ―The Effect of Cohort Size on Earnings Growth: A Reexamination of
the Evidence‖. Journal of Political Economy, V.93-#3, pp. 561-73.
Berkowitz, Daniel; Johannes Moenius and Katharina Pistor (2006). ―Trade, Law, and Product
Complexity‖. Review of Economics and Statistics, V.88-#2, pp. 363-73.
Bernard, Andrew B. and J. Bradford Jensen (2000). ―Understanding Increasing and Decreasing
Wage Inequality‖. In R. C. Feenstra ed, Impact of International Trade Wages, Chicago:
University of Chicago Press, pp. 227-61.
Bernard, Andrew B.; Stephen J. Redding and Peter K. Schott (2009). ―Testing for Factor Price
Equality in the Presence of Unobserved Factor Quality Differences‖. NBER Working
Paper # #8068
Bernard, Andrew B.; Stephen J. Redding; Peter K. Schott and Helen Simpson (2003). ―Relative
Wage Variation and Industry Location‖. NBER Working Paper # #9998
~ 85 ~
____ (2008). ―Relative Wage Variation and Industry Location in the United Kingdom‖. Oxford
Bulletin of Economics and Statistics, V.70-#4, pp. 431-59.
Berndt, Ernst R. and Laurits R. Christensen (1974). ―Testing for Existence of a Consistent
Aggregate Index of Labor Inputs‖. American Economic Review, V.64-#3, pp. 391-404.
Bernstein, Jeffrey R. and David E. Weinstein (2002). ―Do Endowments Predict the Location of
Production? Evidence from National and International Data‖. Journal of International
Economics, V.56-#1, pp. 55-76.
Berry, R. Albert and Ronald Soligo (1969). ―Some Welfare Aspects of International Migration‖.
Journal of Political Economy, V.77-#5, pp. 778-94.
Bertocchi, Graziella and Chiara Strozzi (2008). ―International Migration and the Role of
Institutions‖. Public Choice, V.137-#1-2, pp. 81-102.
Betz, Hans-Georg (1998). ―Germany for the Germans? The Political Effects of International
Migration‖. International History Review, V.20-#3, pp. 755-56.
____ (2001). ―Exclusionary Populism in Austria, Italy, and Switzerland‖. International Journal,
V.56-#3, pp. 393-420.
Bilal, Sanoussi; Jean-Marie Grether and Jaime de Melo (2003). ―Attitudes Towards Immigration:
A Trade-Theoretic Approach‖. Review of International Economics, V.11-#2, pp. 253-67.
Black, D. (1948). ―On the Rationale of Group Decision-Making‖. Journal of Political Economy,
V.56-#1, pp. 23-34.
Black, Duncan and Vernon Henderson (1999). ―Spatial Evolution of Population and Industry in
the United States‖. American Economic Review, V.89-#2, pp. 321-27.
Blanchard, Olivier J. and Lawrence F. Katz (1992). ―Regional Evolutions‖. Brookings Papers on
Economic Activity, 1, pp. 1-61.
Blanes-Cristóbal , José V. (2004). ―El Nexo Entre La Inmigración Y El Comercio En España‖.
Información Comercial Española – Revista de Economía, 814, pp. 39-48.
____ (2005). ―Does Immigration Help to Explain Intra-Industry Trade? Evidence for Spain‖.
Review of World Economics, V.141-#2, pp. 244-70.
____ (2008). ―Characteristics of Immigrants and Bilateral Trade‖. Revista De Economia
Aplicada, V.16-#48, pp. 133-59.
Blanes-Cristóbal , José V. and Joan A.. Martín-Montaner (2006). ―Migration Flows and IntraIndustry Trade Adjustments‖. Review of World Economics, V.142-#3, pp. 567-84.
Böcker, Anita G.M. (1994). ―Chain Migration over Legally Closed Borders: Settled Immigrants
as Bridgeheads and Gatekeepers‖. The Netherlands Journal of Social Sciences, V.30-#2,
pp. 87-106.
____ (1995). ―Migration Networks: Turkish Migration to Western Europe‖. In R. van Erf and L.
Heering eds, Causes of International Migration. Proceedings of a Workshop
Luxembourg: Eurostat, pp. 151-73.
Bodvarsson, Örn B.; Hendrik Van den Berg and Joshua J. Lewer (2008). ―Measuring
Immigration's Effects on Labor Demand: A Reexamination of the Mariel Boatlift‖.
Labour Economics, V.15-#4, pp. 560-74.
Boisso, Dale and Michael Ferrantino (1997). ―Economic Distance, Cultural Distance, and
Openness in International Trade: Empirical Puzzles‖. Journal of Economic Integration,
V.12-#4, pp. 456-84.
Bonacich, Edna (1973). ―Theory of Middleman Minorities‖. American Sociological Review,
V.38-#5, pp. 583-94.
~ 86 ~
Bond, Eric W. (1993a). ―Labor Mobility and Wage Rate Equalization‖. In R. Becker, M.
Boldring, R. W. Jones and W. Thomson eds, General Equilibrium, Growth and Trade II,
San Diego: Academic Press, pp. 442-59.
____ (1993b). ―Trade, Factor Mobility, and Income Distribution in a Regional Model with
Compensating Wage Differentials‖. Regional Science and Urban Economics, V.23-#1,
pp. 67-84.
Bond, Eric W. and Tain-Jy Chen (1987). ―The Welfare Effects of Illegal Immigration‖. Journal
of International Economics, V.23-#3-4, pp. 315-28.
Bonin, Holger (2005). ―Wage and Employment Effects of Immigration to Germany: Evidence
from a Skill Group Approach ‖. IZA Discussion Paper # 1875
Borjas, George J. (1983). ―The Substitutability of Black, Hispanic, and White Labor‖. Economic
Inquiry, V.21-#1, pp. 93-106.
____ (1986a). ―The Demographic Determinants of the Demand for Black Labor‖. In R. B.
Freeman and H. J. Holzer eds, The Black Youth Employment Crisis, Chicago: University
of Chicago Press, pp. 191-230.
____ (1986b). ―The Sensitivity of Labor Demand Functions to Choice of Dependent Variable‖.
Review of Economics and Statistics, V.68-#1, pp. 58-65.
____ (1987). ―Self-Selection and the Earnings of Immigrants‖. American Economic Review,
V.77-#4, pp. 531-53.
____ (1990). Friends or Strangers: The Impact of Immigrants on the U.S. Economy. New York:
Basic Books.
____ (1992). ―Ethnic Capital and Intergenerational Mobility‖. Quarterly Journal of Economics,
V.107-#1, pp. 123-50.
____ (1993). ―The Intergenerational Mobility of Immigrants‖. Journal of Labor Economics,
V.11-#1, pp. 113-35.
____ (1994a). ―The Economics of Immigration‖. Journal of Economic Literature, V.32-#4, pp.
1667-717.
____ (1994b). ―Immigrant Skills and Ethnic Spillovers‖. Journal of Population Economics, V.7#2, pp. 99-118.
____ (1995). ―Ethnicity, Neighborhoods, and Human-Capital Externalities‖. American Economic
Review, V.85-#3, pp. 365-90.
____ (1998). ―To Ghetto or Not to Ghetto: Ethnicity and Residential Segregation‖. Journal of
Urban Economics, V.44-#2, pp. 228-53.
____ (1999a). ―The Economic Analysis of Immigration‖. In O. Ashenfelter and D. Card eds,
Handbook of Labor Economics, Amsterdam: North-Holland, pp. 1697-760.
____ (1999b). Heaven's Door: Immigration Policy and the American Economy. Princeton, N.J.:
Princeton University Press.
____ (2003). ―The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of
Immigration on the Labor Market‖. Quarterly Journal of Economics, V.118-#4, pp.
1335-74.
____ (2006). ―Native Internal Migration and the Labor Market Impact of Immigration‖. Journal
of Human Resources, V.41-#2, pp. 221-58.
Borjas, George J. and Stehpen Bronars (1991). ―Immigration and the Family‖. Journal of Labor
Economics, V.9-#2, pp. 123-48.
~ 87 ~
Borjas, George J. and Richard B. Freeman (1992). ―Introduction and Summary‖. In G. J. Borjas
and R. B. Freeman eds, Immigration and the Work Force, Chicago: University of
Chicago Press, pp. 1-15.
Borjas, George J.; Richard B. Freeman and Lawrence F. Katz (1992). ―On the Labor Market
Effects of Immigration and Trade‖. In G. J. Borjas and R. B. Freeman eds, Immigration
and the Work Force, Chicago: University of Chicago Press/NBER, pp. 213-44.
____ (1997). ―How Much Do Immigration and Trade Affect Labor Market Outcomes?‖.
Brookings Papers on Economic Activity, 1, pp. 1-90.
Borjas, George J.; Jeffrey Grogger and Gordon H. Hanson (2008). ―Imperfect Substitution
between Immigrants and Natives: A Reappraisal‖. NBER Working Paper # #13887
____ (2009). ―Immigration and the Economic Status of African American Men‖. Economica,
V.forthcoming-#.
Borjas, George J. and Lawrence F. Katz (2007). ―The Evolution of the Mexican-Born Workforce
in the United States‖. In G. J. Borjas ed, Mexican Immigration to the United States,
Chicago: University of Chicago Press/NBER, pp. 13-55.
Borjas, George J. and Stephen Trejo (1991). ―Immigrant Participation in the Welfare System‖.
Industrial & Labor Relations Review, V.44-#2, pp. 195-211.
Borsch-Supan, Axel H. (1994). ―Migration, Social Security Systems, and Public Finance‖. In H.
Siebert ed, Migration: A Challenge for Europe: Symposium 1993, Tubingen: Mohr
(Siebeck), pp. 119-42.
Bound, John and Harry J. Holzer (2000). ―Demand Shifts, Population Adjustments, and Labor
Market Outcomes During the 1980s‖. Journal of Labor Economics, V.18-#1, pp. 20-54.
Bound, John; David A. Jaeger and Regina M. Baker (1995). ―Problems with Instrumental
Variables Estimation When the Correlation between the Instruments and the Endogenous
Explanatory Variable Is Weak‖. Journal of the American Statistical Association, V.90#430, pp. 443-50.
Bourdieu, Pierre (1986). ―Forms of Capital‖. In J. G. Richardson ed, Handbook of Theory and
Research for the Sociology, Westport, CT: Greenwood Press, pp. 241-60.
Bourdieu, Pierre and Loïc J. D. Wacquant (1992). An Invitation to Reflexive Sociology. Chicago:
University of Chicago Press.
Bowles, Samuel (1970). ―Aggregation of Labor Inputs in Economics of Growth and Planning:
Experiments with a 2-Level CES Function‖. Journal of Political Economy, V.78-#1, pp.
68-81.
Boyd, Monica (1989). ―Family and Personal Networks in International Migration: Recent
Developments and New Agendas‖. International Migration Review, V.23-#3, pp. 638-70.
Brecher, Richard A. and Ehsan U. Choudhri (1993). ―Some Empirical Support for the
Heckscher-Ohlin Model of Production‖. Canadian Journal of Economics, V.26-#2, pp.
272-85.
Brecher, Richard A. and Robert C. Feenstra (1983). ―International Trade and Capital Mobility
between Diversified Economies‖. Journal of International Economics, V.14-#3-4, pp.
321-39.
Briant, Anthony; Pierre-Philippe Combes and Miren Lafourcade (2009). ―Product Complexity,
Quality of Institutions and the Pro-Trade Effect of Immigrants‖. Paris School of
Economics Working Paper # 2009 - 06
~ 88 ~
Brücker, Herbert and Boriss Siliverstovs (2006). ―On the Estimation and Forecasting of
International Migration: How Relevant Is Heterogeneity across Countries?‖. Empirical
Economics, V.31-#3, pp. 735-54.
Bruder, Jana (2004). ―Are Trade and Migration Substitutes or Complements? The Case of
Germany, 1970-1998‖. University of Rostock, working paper #
Brueckner, Jan K. (2000). ―Welfare Reform and the Race to the Bottom: Theory and Evidence‖.
Southern Economic Journal, V.66-#3, pp. 505-25.
Bryant, John; Murat Genç and David Law (2004). ―Trade and Migration to New Zealand‖. New
Zealand Treasury, Working Paper Series # 04/18
Bucci, Gabriella A. and Rafael Tenorio (1996). ―On Financing the Internal Enforcement of
Illegal Immigration Policies‖. Journal of Population Economics, V.9-#1, pp. 65-81.
Bürgenmeier, Beat; Théo Butare and Philippe Favarger (1991). ―Effects of Foreign Labor on the
Production Pattern: The Swiss Case‖. Swiss Journal of Economics and Statistics, V.128#2, pp. 103-24.
Burgess, David F. (1974). ―Production Theory and Derived Demand for Imports‖. Journal of
International Economics, V.4-#2, pp. 103-17.
____ (1978). ―Distributional Effects of Direct Foreign Investment‖. International Economic
Review, V.19-#3, pp. 647-64.
Burt, Ronald S. (1992). Structural Holes: The Social Structure of Competition. Cambridge,
Mass.: Harvard University Press.
____ (2000). ―The Network Structure of Social Capital‖. In R. I. Sutton and B. M. Staw eds,
Research in Organizational Behavior, Greenwich, CT: JAI Press, pp. 345-423.
Butcher, Kristin F. and John E. DiNardo (2002). ―The Immigrant and Native-Born Wage
Distributions: Evidence from United States Censuses‖. Industrial & Labor Relations
Review, V.56-#1, pp. 97-121.
Calavita, Kitty (1996). ―The New Politics of Immigration: ''Balanced-Budget Conservatism'' and
the Symbolism of Proposition 187‖. Social Problems, V.43-#3, pp. 284-305.
Camarota, Steven A. (1997). ―The Effect of Immigrants on the Earnings of Low-Skilled Native
Workers: Evidence from the June 1991 Current Population Survey‖. Social Science
Quarterly, V.78-#2, pp. 417-31.
Campbell, L. Andrew (1993). ―Samuelson Maps - Recent Results‖. Mathematical and Computer
Modelling, V.17-#12, pp. 3-8.
Card, David (1990). ―The Impact of the Mariel Boatlift on the Miami Labor-Market‖. Industrial
& Labor Relations Review, V.43-#2, pp. 245-57.
____ (2001). ―Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of
Higher Immigration‖. Journal of Labor Economics, V.19-#1, pp. 22-64.
____ (2005). ―Is the New Immigration Really So Bad?‖. Economic Journal, V.115-#507, pp.
F300-F23.
____ (2009). ―Immigration and Inequality‖. American Economic Review, V.99-#2, pp. 1-21.
Card, David and John E. DiNardo (2000). ―Do Immigrant Inflows Lead to Native Outflows?‖.
American Economic Review, V.90-#2, pp. 360-67.
Card, David; Christian Dustmann and Ian Preston (2009). ―Immigration, Wages, and
Compositional Amenities‖. NBER Working Paper # 15521
Card, David and Thomas Lemieux (2001). ―Can Falling Supply Explain the Rising Return to
College for Younger Men? A Cohort-Based Analysis‖. Quarterly Journal of Economics,
V.116-#2, pp. 705-46.
~ 89 ~
Card, David and Ethan Lewis (2007). ―The Diffusion of Mexican Immigrants During the 1990s:
Explanational and Impacts‖. In G. J. Borjas ed, Mexican Immigration to the United
States, Chicago: University of Chicago Press/NBER, pp. 193-277.
Carrasco, Raquel; Juan F. Jimeno and A. Carolina Ortega (2008). ―The Impact of Immigration
on the Wage Structure: Spain 1995-2002‖. Departamento de Economía, Universidad
Carlos III de Madrid Working Paper # 08-16
Carrington, William J. and Pedro J. F. deLima (1996). ―The Impact of 1970s Repatriates from
Africa on the Portuguese Labor Market‖. Industrial & Labor Relations Review, V.49-#2,
pp. 330-47.
Carrington, William J.; Enrica Detragiache and Tara Vishwanath (1996). ―Migration with
Endogenous Moving Costs‖. American Economic Review, V.86-#4, pp. 909-30.
Carrothers, Gerald A.P. (1956). ―An Historical Review of the Gravity and Potential Concepts of
Human Interaction.‖. Journal of the American Institute of Planners, V.22-#2, pp. 94-102.
Carter, Susan and Richard Sutch (1998). ―Historical Background to Current Immigration Issues‖.
In J. P. Smith and B. Edmonston eds, The Immigration Debate: Studies on the Economic,
Demographic, and Fiscal Effects of Immigration, Washington, DC: National Academy
Press, pp. 289-366.
Carter, Thomas J. (1999). ―Illegal Immigration in an Efficiency Wage Model‖. Journal of
International Economics, V.49-#2, pp. 385-401.
____ (2005). ―Undocumented Immigration and Host-Country Welfare: Competition across
Segmented Labor Markets‖. Journal of Regional Science, V.45-#4, pp. 777-95.
Caves, Richard E. (1971). ―International Corporations: Industrial Economics of Foreign
Investment‖. Economica, V.38-#149, pp. 1-27.
Chambers, Robert G. (1988). Applied Production Analysis : A Dual Approach. Cambridge
England ; New York: Cambridge University Press.
Chang, Winston W. (1979). ―Some Theorems of Trade and General Equilibrium with Many
Goods and Factors‖. Econometrica, V.47-#3, pp. 709-26.
Chang, Winston W.; Wilfred J. Ethier and Murray C. Kemp (1980). ―The Theorems of
International Trade with Joint Production‖. Journal of International Economics, V.10-#3,
pp. 377-94.
Ching, H.S. and L.-L. Chen (2000). ―Links between Emigrants and the Home Country: The Case
of Trade between Taiwan and China‖. In H. Kohno, P. Nijkamp and J. Poot eds, Regional
Cohesion and Competition in the Age of Globalization, Cheltenham: Edward Elgar, pp.
Chipman, John S. (1971). ―International Trade with Capital Mobility: A Substitution Theorem‖.
In J. Bhagwati, R. W. Jones, R. A. Mundell and J. Vanek eds, Trade, Balance of
Payments and Growth, Amsterdam: North-Holland, pp. 201-37.
Chiswick, Barry R.; Carmel U. Chiswick and Paul W. Miller (1985). ―Are Immigrants and
Natives Perfect Substitutes in Production‖. International Migration Review, V.19-#4, pp.
674-85.
Chung, Jae Wan (1994). Utility and Production Functions: Theory and Applications. Oxford,
UK ; Cambridge, Mass., USA: Blackwell.
Citrin, Jaci; Donald P. Green; Christopher Muste and Cara Wong (1997). ―Public Opinion
toward Immigration Reform: The Role of Economic Motivations‖. Journal of Politics,
V.59-#3, pp. 858-81.
Clark, Don and Henry Thompson (1986). ―Immigration, International Capital Flows, and LongRun Income Distribution in Canada‖. Atlantic Economic Journal, V.14-#4, pp. 24-29.
~ 90 ~
____ (1990). ―Factor Migration and Income Distribution in Some Developing Countries‖.
Bulletin of Economic Research, V.42-#2, pp. 131-40.
Clark, Ximena; Timothy J. Hatton and Jeffrey G. Williamson (2007). ―Explaining US
Immigration, 1971-1998‖. Review of Economics and Statistics, V.89-#2, pp. 359-73.
Co, Catherine Y.; Patricia Euzent and Thomas Martin (2004). ―The Export Effect of Immigration
into the USA‖. Applied Economics, V.36-#6, pp. 573-83.
Cohen-Goldner, Sarit and M. Daniele Paserman (2004). ―The Dynamic Impact of Immigration
on Natives' Labor Market Outcomes: Evidence from Israel‖. IZA Discussion Paper #
#1315
Cohen, Abner (1969). Custom and Politics in Urban Africa: A Study of Hausa Migrants in
Yoruba Towns. London: Routledge & Kegan Paul.
____ (1971). ―Cultural Strategies in the Organization of Trading Diasporas‖. In C. Meillassoux
ed, The Development of Indigenous Trade and Markets in West Africa, Oxford: Oxford
University Press, pp. 266-78.
Coleman, James Samuel (1990). Foundations of Social Theory. Cambridge, Mass.: Belknap
Press of Harvard University Press.
Collins, William J.; Kevin H. O‘Rourke and Jeffrey G. Williamson (1999). ―Were Trade and
Factor Mobility Substitutes in History?‖. In R. Faini, J. deMelo and K. F. Zimmermann
eds, Migration: The Controversies and the Evidence, Cambridge: Cambridge University
Press, pp. 227-59.
Combes, Pierre-Philippe; Miren Lafourcade and Thierry Mayer (2003). ―Can Business and
Social Networks Explain the Border Effect Puzzle?‖. C.E.P.R. Discussion Papers # 3750
____ (2005). ―The Trade-Creating Effects of Business and Social Networks: Evidence from
France‖. Journal of International Economics, V.66-#1, pp. 1-29.
Cortes, Patricia (2008). ―The Effect of Low-Skilled Immigration on U. S. Prices: Evidence from
CPI Data‖. Journal of Political Economy, V.116-#3, pp. 381-422.
Courant, Paul N. and Alan V. Deardorff (1992). ―International Trade with Lumpy Countries‖.
Journal of Political Economy, V.100-#1, pp. 198-210.
Cremer, Helmuth and Pierre Pestieau (1998). ―Social Insurance, Majority Voting and Labor
Mobility‖. Journal of Public Economics, V.68-#3, pp. 397-420.
Cukierman, Alex; Zvi Hercowitz and David Pines (1994). ―The Political Economy of
Immigration‖. Foerder Institute for Economic Research Working Paper # #17/93
Curtin, Philip D. (1984). Cross-Cultural Trade in World History. Cambridge Cambridgeshire ;
New York: Cambridge University Press.
D'Amuri, Francesco; Gianmarco I. P. Ottaviano and Giovanni Peri (2010). ―The Labor Market
Impact of Immigration in Western Germany in the 1990's‖. European Economic Review,
V.54-#4, pp. 550-70.
Dahinden, Janine (2005). ―Contesting Transnationalism? Lessons from the Study of Albanian
Migration Networks from Former Yugoslavia‖. Global Networks, V.5-#2, pp. 191-208.
Dahl, Gordon (2002). ―Mobility and the Return to Education: Testing a Roy Model with
Multiple Markets‖. Econometrica, V.70-#6, pp. 2367-420.
Davies, James B. and Ian Wooton (1992). ―Income Inequality and International Migration‖.
Economic Journal, V.102-#413, pp. 789-802.
Davies, Paul; Michael J. Greenwood; Gary L. Hunt; Ulrich Kohli and Marta Tienda (1998). ―The
U.S. Labor Market Impacts of Low-Skill Migration from Mexico‖. In, Binational Study:
~ 91 ~
Migration between Mexico and the United States, Washington, DC: U.S. Commission on
Immigration Reform, pp. 1075-116.
Dávila, Alberto; José A. Pagán and Montserrat Viladrich Grau (1999). ―Immigration Reform, the
INS, and the Distribution of Interior and Border Enforcement Resources‖. Public Choice,
V.99-#3-4, pp. 327-45.
Davis, Donald R. and David E. Weinstein (1999). ―Economic Geography and Regional
Production Structure: An Empirical Investigation‖. European Economic Review, V.43#2, pp. 379-407.
____ (2001). ―An Account of Global Factor Trade‖. American Economic Review, V.91-#5, pp.
1423-53.
Davis, Donald R.; David E. Weinstein; Scott C. Bradford and K. Shimpo (1997). ―Using
International and Japanese Regional Data to Determine When the Factor Abundance
Theory of Trade Works‖. American Economic Review, V.87-#3, pp. 421-46.
de Blasio, Guido and Sabrina Di Addario (2002). ―Labor Market Pooling‖. IMF Working Paper
# 02/121
de Groot, Henri L. F.; Gert Jan Linders; Piet Rietveld and Uma Subramanian (2004). ―The
Institutional Determinants of Bilateral Trade Patterns‖. Kyklos, V.57-#1, pp. 103-23.
de Melo, Jaime; Jean-Marie Grether and Tobias Müller (2001). ―The Political Economy of
International Migration in a Ricardo-Viner Model‖. In S. Djajic ed, International
Migration: Trends, Policy, Impact, London: Routland, pp. 42-68.
de Melo, Jaime; Florence Miguet and Tobias Muller (2004). ―The Political Economy of
Migration and EU Enlargement: Lessons from Switzerland‖. In H. Berger and T. Moutos
eds, Managing European Union Enlargement, Cambridge: MIT Press/CESifo, pp. 12967.
De New, J. P. and Klaus F. Zimmermann (1994). ―Native Wage Impacts of Foreign Labor: A
Random Effects Panel Analysis‖. Journal of Population Economics, V.7-#2, pp. 177-92.
Deardorff, Alan V. (1986). ―Firless Firwoes: How Preferences Can Interfere with the Theorems
of International Trade‖. Journal of International Economics, V.20-#1-2, pp. 131-42.
____ (1994). ―The Possibility of Factor Price Equalization, Revisited‖. Journal of International
Economics, V.36-#1-2, pp. 167-75.
Deardorff, Alan V. and Paul N. Courant (1990). ―On the Likelihood of Factor Price Equalization
with Nontraded Goods‖. International Economic Review, V.31-#3, pp. 589-96.
Decressin, Jörg and Antonio Fatás (1995). ―Regional Labor Market Dynamics in Europe‖.
European Economic Review, V.39-#9, pp. 1627-55.
Dickens, William and Lawrence F. Katz (1987). ―Inter-Industry Wage Differences and Industry
Characteristics‖. In K. Lang and J. Leonard eds, Unemployment and the Structure of
Labor Markets, pp. 48-89.
Dietz, Barbara (2000). ―German and Jewish Migration from the Former Soviet Union to
Germany: Background, Trends and Implications‖. Journal of Ethnic and Migration
Studies, V.26-#4, pp. 635-52.
Diewert, W. Erwin and Terence J. Wales (1987). ―Flexible Functional Forms and Global
Curvature Conditions‖. Econometrica, V.55-#1, pp. 43-68.
Diewert, W. Erwin and Alan D. Woodland (1977). ―Frank Knight's Theorem in LinearProgramming Revisited‖. Econometrica, V.45-#2, pp. 375-98.
DiNardo, John E. (1997). ―Comment on Borjas, Freeman and Katz (1997)‖. Brookings Papers
on Economic Activity, V.1997-#1, pp. 68-76.
~ 92 ~
DiNardo, John E.; Nicole M. Fortin and Thomas Lemieux (1996). ―Labor Market Institutions
and the Distribution of Wages, 1973-1992: A Semiparametric Approach‖. Econometrica,
V.64-#5, pp. 1001-44.
Dixit, Avinash K. (2003a). ―On Modes of Economic Governance‖. Econometrica, V.71-#2, pp.
449-81.
____ (2003b). ―Trade Expansion and Contract Enforcement‖. Journal of Political Economy,
V.111-#6, pp. 1293-317.
____ (2004). Lawlessness and Economics: Alternative Modes of Governance. Princeton, N. J. ;
Oxford: Princeton University Press.
____ (2009). ―Governance Institutions and Economic Activity‖. American Economic Review,
V.99-#1, pp. 5-24.
Dixit, Avinash K. and Victor D. Norman (1980). Theory of International Trade: A Dual,
General Equilibrium Approach. Cambridge: Cambridge University Press.
Dixit, Avinash K. and Alan D. Woodland (1982). ―The Relationship between Factor
Endowments and Commodity Trade‖. Journal of International Economics, V.13-#3-4,
pp. 201-14.
Djajic, Slobodan (1997). ―Illegal Immigration and Resource Allocation‖. International Economic
Review, V.38-#1, pp. 97-117.
Dollar, David; Edward N. Wolff and William Baumol (1988). ―The Factor Price Equalization
Model and Industry Labor Productivity: An Empirical Test across Countries‖. In R. C.
Feenstra ed, Empirical Methods for International Trade, Cambridge: MIT Press, pp. 2347.
Dolmas, Jim and Gregory W. Huffman (2004). ―On the Political Economy of Immigration and
Income Redistribution‖. International Economic Review, V.45-#4, pp. 1129-68.
Dunlevy, James A. (2006). ―The Influence of Corruption and Language on the Protrade Effect of
Immigrants: Evidence from the American States‖. Review of Economics and Statistics,
V.88-#1, pp. 182-86.
Dunlevy, James A. and William K. Hutchinson (1999). ―The Impact of Immigration on
American Import Trade in the Late Nineteenth and Early Twentieth Centuries‖. Journal
of Economic History, V.59-#4, pp. 1043-62.
Durand, Jorge and Douglas S. Massey (2004). Crossing the Border: Research from the Mexican
Migration Project. New York: Russell Sage Foundation.
Dustmann, Christian; Francesca Fabbri and Ian P. Preston (2005). ―The Impact of Immigration
on the British Labour Market‖. Economic Journal, V.115-#507, pp. F324-F41.
Dustmann, Christian and Ian P. Preston (2007). ―Racial and Economic Factors in Attitudes to
Immigration‖. B E Journal of Economic Analysis & Policy, V.7-#1, pp. -.
Eger, Maureen A. (2010). ―Even in Sweden: The Effect of Immigration on Support for Welfare
State Spending‖. European Sociological Review, V.26-#2, pp. 203-17.
Elrick, Tim and Oana Ciobanu (2009). ―Migration Networks and Policy Impacts: Insights from
Romanian-Spanish Migrations‖. Global Networks, V.9-#1, pp. 100-16.
Epstein, Gil S. and Ira N. Gang (2006). ―Ethnic Networks and International Trade‖. In F. Foders
and R. J. Langhammer eds, Labor Mobility and the World Economy, Berlin: Springer, pp.
85-103.
Espenshade, Thomas J. and Greg A. Huber (1998). ―Fiscal Impacts of Immigrants and the
Shrinking Welfare State‖. In C. Hirschman, J. DeWind and P. Kasnitz eds, The
~ 93 ~
Handbook of International Migration: The American Experience, New York: Russell
Sage, pp. 360-70.
Ethier, Wilfred J. (1984). ―Higher Dimensional Issues in Trade Theory‖. In R. W. Jones and P.
Kenen eds, Handbook of International Economics, Amsterdam: North-Holland, pp. 13184.
____ (1985). ―International Trade and Labor Migration‖. American Economic Review, V.75-#4,
pp. 691-707.
____ (1986a). ―Illegal Immigration‖. American Economic Review, V.76-#2, pp. 258-62.
____ (1986b). ―Illegal Immigration: The Host Country Problem‖. American Economic Review,
V.76-#1, pp. 56-71.
____ (1986c). ―International Trade Theory and International Migration‖. In O. Stark ed,
Migration, Human Capital and Development, Greenwich: JAI Press, pp. 27-74.
____ (1986d). ―The Multinational Firm‖. Quarterly Journal of Economics, V.101-#4, pp. 80533.
____ (1996). ―Theories About Trade Liberalisation and Migration: Substitutes or
Complements?‖. In P. J. Lloyd and L. Williams eds, International Trade and Migration
in the Apec Region, Melbourne: Oxford University Press, pp. 50-68.
Ethier, Wilfred J. and Stephen A. Ross (1971). ―International Capital Movements and Long Run
Diversification‖. Journal of International Economics, V.1-#3, pp. 301-14.
Ethier, Wilfred J. and Lars E. O. Svensson (1986). ―The Theorems of International Trade with
Factor Mobility‖. Journal of International Economics, V.20-#1-2, pp. 21-42.
Facchini, Giovanni and Anna Maria Mayda (2008). ―From Individual Attitudes Towards
Migrants to Migration Policy Outcomes: Theory and Evidence‖. Economic Policy, 56,
pp. 65 –713.
____ (2009). ―Does the Welfare State Affect Individual Attitudes toward Immigrants? Evidence
across Countries‖. Review of Economics and Statistics, V.91-#2, pp. 295-314.
Facchini, Giovanni; Anna Maria Mayda and Prachi Mishra (2008). ―Do Interest Groups Affect
US Immigration Policy?‖. CEPR Discussion Paper # 6898
Facchini, Giovanni and Gerald Willmann (2005). ―The Political Economy of International Factor
Mobility‖. Journal of International Economics, V.67-#1, pp. 201-19.
Falvey, Rodney E. (1979). ―Specific Factors, Comparative Advantage and International
Investment: An Extension‖. Economica, V.46-#181, pp. 77-82.
Falvey, Rodney E. and Udo Kreickemeier (2005). ―Globalisation and Factor Returns in
Competitive Markets‖. Journal of International Economics, V.66-#1, pp. 233-48.
Feenstra, Robert C. (1996). ―Foreign Investment, Outsourcing and Relative Wages‖. In R. C.
Feenstra, G. M. Grossman and D. A. Irwin eds, The Political Economy of Trade Policy,
Cambridge: MIT Press, pp. 89-127.
Feenstra, Robert C. and Gordon H. Hanson (1997). ―Foreign Direct Investment and Relative
Wages: Evidence from Mexico's Maquiladoras‖. Journal of International Economics,
V.42-#3-4, pp. 371-93.
Felbermayr, Gabriel; Wido Geis and Wilhelm Kohler (2010). ―Restrictive Immigration Policy in
Germany: Pains and Gains Foregone?‖. Review of World Economics, V.146-#1, pp. 1-21.
Ferguson, D. G. (1978). ―International Capital Mobility and Comparative Advantage: 2-Country,
2-Factor Case‖. Journal of International Economics, V.8-#3, pp. 373-96.
~ 94 ~
Filer, Randall (1992). ―The Effect of Immigrant Arrivals on Migratory Patterns of Native
Workers‖. In G. J. Borjas and R. B. Freeman eds, Immigration and the Work Force,
Chicago: University of Chicago Press/NBER, pp. 245-69.
Flatters, Frank (1972). ―Commodity Price Equalization: Note on Factor Mobility and Trade‖.
American Economic Review, V.62-#3, pp. 473-76.
Flores, Oscar (1997). ―The Political Economy of Immigration Quotas‖. Atlantic Economic
Journal, V.25-#1, pp. 50-59.
Freeman, Richard B. (1976). The Overeducated American. New York: Academic Press.
____ (1979). ―Effect of Demographic Factors on Age-Earnings Profiles‖. Journal of Human
Resources, V.14-#3, pp. 289-318.
____ (1993). ―Immigration from Poor to Wealthy Countries: Experience of the United-States‖.
European Economic Review, V.37-#2-3, pp. 443-51.
____ (1998). ―Will Globalization Dominate U.S. Labor Market Outcomes?‖. In S. M. Collins ed,
Imports, Exports and the American Worker, Washington, DC: Brookings Institution
Press, pp. 101-31.
Frey, William H. (1995). ―Immigration and Internal Migration Flight from US Metropolitan
Areas: Toward a New Demographic Balkanisation‖. Urban Studies, V.32-#4-5, pp. 73357.
Frey, William H. and Kao-Lee Liaw (1998). ―The Impact of Recent Immigration on Population
Redistribution within the United States‖. In J. P. Smith and B. Edmonston eds, The
Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of
Immigration, Washington, DC: National Academy Press, pp. 388-448.
Friedberg, Rachel M. (2001). ―The Impact of Mass Migration on the Israeli Labor Market‖.
Quarterly Journal of Economics, V.116-#4, pp. 1373-408.
Friedberg, Rachel M. and Jennifer Hunt (1995). ―The Impact of Immigrants on Host Country
Wages, Employment and Growth‖. Journal of Economic Perspectives, V.9-#2, pp. 23-44.
Fussell, E. and Douglas S. Massey (2004). ―The Limits to Cumulative Causation: International
Migration from Mexican Urban Areas‖. Demography, V.41-#1, pp. 151-71.
Gaisford, James D. (1995). ―International Capital Mobility, the Factor Content of Trade and
Leontief Paradoxes‖. Journal of International Economics, V.39-#1-2, pp. 175-83.
Gallardo-Sejas, Hugo; Salvador-Gil Pareja; Rafael Llorca-Vivero and José Martinez-Serrano
(2006). ―Determinants of European Immigration: A Cross-Country Analysis‖. Applied
Economics Letters, V.13-#12, pp. 769-73.
Gandal, Neil; Gordon H. Hanson and Matthew J. Slaughter (2004). ―Technology, Trade, and
Adjustment to Immigration in Israel‖. European Economic Review, V.48-#2, pp. 403-28.
Gang, Ira N. and Francisco I. Rivera-Batiz (1994). ―Labor Market Effects of Immigration in the
United-States and Europe: Substitution Vs Complementarity‖. Journal of Population
Economics, V.7-#2, pp. 157-75.
Gang, Ira N.; Francisco Rivera-Batiz and Myeong-Su Yun (2002). ―Economic Strain, Ethnic
Concentration and Attitudes Towards Foreigners in the European Union‖. IZA Discussion
Paper # 578
Gaston, Noel and Douglas Nelson (2000). ―Immigration and Labour Market Outcomes in the
United States: A Political-Economy Puzzle‖. Oxford Review of Economic Policy, V.16#3, pp. 104-14.
~ 95 ~
Gatsios, Konstantine; Panos Hatzipanayotou and Michael S. Michael (1999). ―International
Migration, the Provision of Public Goods, and Welfare‖. Journal of Development
Economics, V.60-#2, pp. 559-75.
Gavosto, Andrea; Alessandra Venturini and Claudia Villosio (1999). ―Do Immigrants Compete
with Natives?‖. Labour, V.13-#3, pp. 603-21.
Geertz, Clifford (1963). Peddlers and Princes; Social Change and Economic Modernization in
Two Indonesian Towns. Chicago,: University of Chicago Press.
____ (1978). ―Bazaar Economy: Information and Search in Peasant Marketing‖. American
Economic Review, V.68-#2, pp. 28-32.
Ghatak, Subrata; Monica I. P. Silaghi and Vince Daly (2009). ―Trade and Migration Flows
between Some Cee Countries and the UK‖. Journal of International Trade & Economic
Development, V.18-#1, pp. 61-78.
Gimpel, James G. and James R. Edwards (1999). The Congressional Politics of Immigration
Reform. Boston: Allyn and Bacon.
Ginsberg, Ralph B. (1972). ―Incorporating Causal Structure and Exogenous Information with
Probabilistic Models: With Special Reference to Choice, Gravity, Migration and Markov
Chains‖. Journal of Mathematical Sociology, V.2-#, pp. 83-104.
Girma, Sourafel and Zhihao Yu (2002). ―The Link between Immigration and Trade: Evidence
from the United Kingdom‖. Weltwirtschaftliches Archiv-Review of World Economics,
V.138-#1, pp. 115-30.
Glitz, Albrecht (2006). ―The Labour Market Impact of Immigration: Quasi-Experimental
Evidence‖. CReAM Discussion Paper # 0612
Goldin, Claudia (1994). ―The Political Economy of Immigration Restriction in the US‖. In C.
Goldin and G. Liebcap eds, The Regulated Economy: A Historical Approach to Political
Economy, Chicago: University of Chicago Press, pp. 223-57.
Gould, David M. (1994). ―Immigrant Links to the Home Country: Empirical Implications for
United States Bilateral Trade Flows‖. Review of Economics and Statistics, V.76-#2, pp.
302-16.
Goyal, Sanjeev (2009). Connections: An Introduction to the Economics of Networks. Princeton:
Princeton University Press.
Granovetter, Mark (1973). ―Strength of Weak Ties‖. American Journal of Sociology, V.78-#6,
pp. 1360-80.
____ (1983). ―The Strength of Weak Ties Revisited‖. In R. Collins ed, Sociological Theory1983, pp. 201-33.
____ (2005). ―The Impact of Social Structure on Economic Outcomes‖. Journal of Economic
Perspectives, V.19-#1, pp. 33-50.
Greenaway, David and Douglas R. Nelson (2005). ―The Politics of (Anti-) Globalization: What
Do We Learn from Simple Models?‖. GEP Research Paper # 05/35
____ (2006). ―The Distinct Political Economics of Trade and Migration Policy: Through the
Window of Endogenous Policy Models, with a Focus on North America‖. In F. Foders
and R. J. Langhammer eds, Labor Mobility and the World Economy, Berlin: Springer, pp.
295-327.
____ (2010). ―The Politics of (Anti-) Globalization: What Do We Learn from Simple Models?‖.
In N. Gatston and A. Khalid eds, Globalization and Economic Integration: Winners and
Losers in the Asia-Pacific, Cheltenham: Elgar, pp. 69-92.
~ 96 ~
Greenwood, Michael J. (1975). ―Research on Internal Migration in United States: Survey‖.
Journal of Economic Literature, V.13-#2, pp. 397-433.
____ (1997). ―Internal Migration in Developed Countries‖. In M. R. Rosenzweig and O. Stark
eds, Handbook of Population and Family Economics, Amsterdam: Elsevier, pp. 647-720.
Greenwood, Michael J. and Gary L. Hunt (1995). ―Economic Effects of Immigrants on Native
and Foreign-Born Workers: Complementarity, Substitutability, and Other Channels of
Influence‖. Southern Economic Journal, V.61-#4, pp. 1076-97.
____ (2003). ―The Early History of Migration Research‖. International Regional Science
Review, V.26-#1, pp. 3-37.
Greenwood, Michael J.; Gary L. Hunt and Ulrich Kohli (1996). ―The Short-Run and Long-Run
Factor-Market Consequences of Immigration to the United States‖. Journal of Regional
Science, V.36-#1, pp. 43-66.
____ (1997). ―The Factor-Market Consequences of Unskilled Immigration to the United States‖.
Labor Economics, V.4-#1, pp. 1-28.
Greif, Avner (1989). ―Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi
Traders‖. Journal of Economic History, V.49-#4, pp. 857-82.
____ (1991). ―The Organization of Long-Distance Trade: Reputation and Coalitions in the
Geniza Documents and Genoa During the 11th-Century and 12th-Century‖. Journal of
Economic History, V.51-#2, pp. 459-62.
____ (1993). ―Contract Enforceability and Economic Institutions in Early Trade: The Maghribi
Traders Coalition‖. American Economic Review, V.83-#3, pp. 525-48.
____ (1997). ―Contracting, Enforcement, and Efficiency: Economics Beyond the Law‖. Annual
World Bank Conference on Development Economics 1996, pp. 239-78
350.
Grogger, Jeffrey and Gordon H. Hanson (2008). ―Income Maximization and the Selection and
Sorting of International Migrants‖. NBER Working Paper # #13821
Grossman, Jean Baldwin (1982). ―The Substitutability of Natives and Immigrants in
Production‖. Review of Economics and Statistics, V.64-#4, pp. 596-603.
Grubel, Herbert B. and Anthony D. Scott (1966). ―International Flow of Human Capital‖.
American Economic Review, V.56-#2, pp. 268-74.
Guiso, Luigi; Paola Sapienza and Luigi Zingales (2009). ―Cultural Biases in Economic
Exchange?‖. Quarterly Journal of Economics, V.124-#3, pp. 1095-131.
Gurak, Douglas T. and Fe Caces (1992). ―Migration Networks and the Shaping of Migration
Systems‖. In M. Kritz, L. L. Lin and H. Zlotnik eds, International Migration Systems: A
Global Approach, Oxford: Oxford University Press, pp. 150-76.
Gurak, Douglas T. and Mary M. Kritz (2000). ―The Interstate Migration of US Immigrants:
Individual and Contextual Determinants‖. Social Forces, V.78-#3, pp. 1017-39.
Hainmueller, Jens and Michael J. Hiscox (2007). ―Educated Preferences: Explaining Attitudes
toward Immigration in Europe‖. International Organization, V.61-#2, pp. 399-442.
____ (forthcoming). ―Attitudes toward Highly Skilled and Low Skilled Immigration: Evidence
from a Survey Experiment‖. American Political Science Review.
Hamermesh, Daniel S. (1993). Labor Demand. Princton, N.J.: Princeton University Press.
____ (2000). ―The Craft of Labormetrics‖. Industrial & Labor Relations Review, V.53-#3, pp.
363-80.
Hansen, Jørgen Drud (2003). ―Immigration and Income Redistribution in Welfare States‖.
European Journal of Political Economy, V.19-#4, pp. 735-46.
~ 97 ~
Hanson, Gordon H. (2001). ―Scale Economies and the Geographic Concentration of Industry‖.
Journal of Economic Geography, V.1-#, pp. 255-76.
____ (2006). ―Illegal Migration from Mexico to the United States‖. Journal of Economic
Literature, V.44-#4, pp. 869-924.
____ (2009). ―The Economic Consequences of International Migration‖. Annual Review of
Economics, V.1-#, pp. 179-208.
Hanson, Gordon H.; Kenneth Scheve and Matthew J. Slaughter (2007). ―Public Finance and
Individual Preferences over Globalization Strategies‖. Economics and Politics, V.19-#1,
pp. 1-33.
Hanson, Gordon H. and Matthew J. Slaughter (2002). ―Labor Market Adjustment in Open
Economies: Evidence from US States‖. Journal of International Economics, V.57-#1, pp.
3-29.
Hanson, Gordon H. and Antonio Spilimbergo (1999). ―Illegal Immigration, Border Enforcement,
and Relative Wages: Evidence from Apprehensions at the US-Mexico Border‖. American
Economic Review, V.89-#5, pp. 1337-57.
____ (2001). ―Political Economy, Sectoral Shocks, and Border Enforcement‖. Canadian Journal
of Economics, V.34-#3, pp. 612-38.
Harms, Philipp and Stefan Zink (2003). ―Limits to Redistribution in a Democracy: A Survey‖.
European Journal of Political Economy, V.19-#4, pp. 651-68.
Harrigan, James (1995). ―Factor Endowments and the International Location of Production Econometric Evidence for the Oecd, 1970-1985‖. Journal of International Economics,
V.39-#1-2, pp. 123-41.
____ (1997). ―Technology, Factor Supplies, and International Specialization: Estimating the
Neoclassical Model‖. American Economic Review, V.87-#4, pp. 475-94.
____ (2002). ―Specialization and the Volume of Trade: Do the Data Obey the Laws?‖. In E. K.
Choi and J. Harrigan eds, Handbook of International Trade, Oxford: Blackwell, pp. 85118.
Harrigan, James and Egon Zakrajšek (2000). ―Factor Supplies and Specialization in the World
Economy‖. In Staff reports no. 107. New York, N.Y.: Federal Reserve Bank of New
York.
Harvey, William S. (2008). ―Strong or Weak Ties? British and Indian Expatriate Scientists
Finding Jobs in Boston‖. Global Networks, V.8-#4, pp. 453-73.
Hatton, Timothy J. and Massimiliano Tani (2005). ―Immigration and Inter-Regional Mobility in
the UK, 1982-2000‖. Economic Journal, V.115-#507, pp. F342-F58.
Hatton, Timothy J. and Jeffrey G. Williamson (2006). ―International Migration in the Long-Run:
Positive Selection, Negative Selection and Policy‖. In F. Foders and R. J. Langhammer
eds, Labour Mobility and the World Economy, Kiel: Springer, pp.
____ (2007). ―A Dual Policy Paradox: Why Have Trade and Immigration Policies Always
Differed in Labor-Scarce Economies?‖. In T. J. Hatton, K. H. O'Rourke and A. M. Taylor
eds, The New Comparative Economic History: Essays in Honor of Jeffrey G. Williamson,
Cambridge: MIT Press, pp. 217-40.
Hatzipanayotou, Panos (1994). ―Nontraded Goods, Capital Taxes, and Temporary Immigration
in a Small Open Economy‖. International Economic Journal, V.8-#4, pp. 15-26.
Haug, Sonja (2005). ―East-West Migration from Central and Eastern Europe to Germany: Data
Sets, Migration Models and Predication of Migration Potential‖. In K. Slany ed,
~ 98 ~
International Migration. A Multidimensional Analysis, Krakow: AGH University of
Science and Technology, pp. 191-215.
____ (2008). ―Migration Networks and Migration Decision-Making ‖. Journal of Ethnic and
Migration Studies, V.34-#4, pp. 585-605.
Haupt, Alexander and Wolfgang Peters (1998). ―Public Pensions and Voting on Immigration‖.
Public Choice, V.95-#3-4, pp. 403-13.
____ (2003). ―Voting on Public Pensions with Hands and Feet‖. Economics of Governance, V.4#1, pp. 57-80.
Head, Keith and John Ries (1998). ―Immigration and Trade Creation: Econometric Evidence
from Canada‖. Canadian Journal of Economics, V.31-#1, pp. 47-62.
Helliwell, John F. (1997). ―National Borders, Trade and Migration‖. Pacific Economic Review,
V.2-#3, pp. 165-85.
____ (1998). How Much Do National Borders Matter? Washington, D.C.: Brookings Institution
Press.
Helmenstein, Christian and Yury Yegorov (2000). ―The Dynamics of Migration in the Presence
of Chains‖. Journal of Economic Dynamics and Control, V.24-#2, pp. 307-23.
Helpman, Elhanan and Paul R. Krugman (1985). Market Structure and Foreign Trade:
Increasing Returns, Imperfect Competition, and the International Economy. Cambridge,
Mass.: MIT Press.
Herander, Mark G. and Luz A. Saavedra (2005). ―Exports and the Structure of Immigrant-Based
Networks: The Role of Geographic Proximity‖. Review of Economics and Statistics,
V.87-#2, pp. 323-35.
Hicks, John (1970). ―Elasticity of Substitution Again - Substitutes and Complements‖. Oxford
Economic Papers-New Series, V.22-#3, pp. 289-96.
Hijzen, Alexander and Peter W. Wright (2010). ―Migration, Trade and Wages‖. Journal of
Population Economics, V.forthcoming-#.
Hill, John K. and José A. Mendez (1983). ―Factor Mobility and the General Equilibrium Model
of Production‖. Journal of International Economics, V.15-#1-2, pp. 19-25.
Hillman, Arye L. and Avi Weiss (1999). ―A Theory of Permissible Illegal Immigration‖.
European Journal of Political Economy, V.15-#4, pp. 585-604.
Hofer, Helmut and Peter Huber (2003). ―Wage and Mobility Effects of Trade and Migration on
the Austrian Labour Market‖. Empirica, V.30-#2, pp. 107-25.
Hong, Tan Chuie and A. Solucis Santhapparaj (2006). ―Skilled Labor Immigration and External
Trade in Malaysia: A Pooled Data Analysis ‖. Perspectives on Global Development and
Technology, V.5-#4, pp. 351-66.
Horiba, Yutaka (2008). ―U.S. Interregional Migration and Trade‖. Osaka Economic Papers,
V.58-#2, pp. 159-71.
Horiba, Yutaka and Rickey C. Kirkpatrick (1983). ―United States North-South Labor Migration
and Trade‖. Journal of Regional Science, V.23-#1, pp. 93-103.
Hugo, Graeme (1981). ―Village-Community Ties, Village Norms, and Ethnic and Social
Networks: A Review of the Evidence from the Third World‖. In G. DeJong and R.
Gardner eds, Migration Decision Making: Multidisciplinary Approaches to Microlevel
Studies in Developed and Developing Countries, New York: Pergamon Press, pp. 186225.
Hunt, Jennifer (1992). ―The Impact of the 1962 Repatriates from Algeria on the French LaborMarket‖. Industrial & Labor Relations Review, V.45-#3, pp. 556-72.
~ 99 ~
____ (2006). ―Staunching Emigration from East Germany: Age and the Determinants of
Migration‖. Journal of the European Economic Association, V.4-#5, pp. 1014-37.
Hutchinson, William K. (2002). ―Does Ease of Communication Increase Trade? Commonality of
Language and Bilateral Trade‖. Scottish Journal of Political Economy, V.49-#5, pp. 54456.
____ (2005). ―"Linguistic Distance" as a Determinant of Bilateral Trade‖. Southern Economic
Journal, V.72-#1, pp. 1-15.
Hutchinson, William K. and James A. Dunlevy (2001). ―The Pro-Trade Effects of Immigration
on American Exports During the Period 1870 to 1910‖. Vanderbilt University Working
Paper # 01-W25
Hymer, Stephen (1960/1976). The International Operations of National Firms : A Study of
Direct Foreign Investment. Cambridge, Mass.: MIT Press.
Inada, Kenichi and Murray C. Kemp (1969). ―International Capital Movements and Theory of
Tariffs and Trade - Comment‖. Quarterly Journal of Economics, V.83-#3, pp. 524-28.
Inoue, Tadashi (1986). ―On the Shape of the World Production Possibility Frontier with 3 Goods
and 2 Primary Factors with and without Capital Mobility‖. International Economic
Review, V.27-#3, pp. 707-26.
Jackson, Matthew O. (2008). Social and Economic Networks. Princeton: Princeton University
Press.
Jansen, Marion and Roberta Piermartini (2009). ―Temporary Migration and Bilateral Trade
Flows‖. World Economy, V.32-#5, pp. 735-53.
Jayet, Hubert; Lionel Ragot and Dominique Rajaonarison (2001). ―L' Immigration: Quels Effets
Économiques?‖. Revue d'Économique Politique, V.111-#4, pp. 565-96.
Jedlicka, Davor (1979). ―Opportunities, Information Networks and International Migration
Streams‖. Social Networks, V.1-#3, pp. 277-84.
Jiang, Shan (2007). ―Immigration, Information and Trade Margins‖. Department of Economics,
University of Calgary # 2007-16
Johnson, George (1980). ―The Labor Market Effects of Immigrants‖. Industrial and Labor
Relations Review, V.33-#3, pp. 331-41.
____ (1998). ―The Impact of Immigration on Income Distribution among Minorities‖. In D. S.
Hamermesh and F. D. Bean eds, Help or Hindrance? The Economic Implications of
Immigration for African Americans, New York: Russell Sage, pp. 17-50.
Johnson, Harry G. (1967). ―Some Economic Aspects of the Brain Drain‖. Pakistan Development
Review, V.7-#, pp. 379-411.
Jones, Maldwyn A. (1992a). American Immigration. Chicago: University of Chicago Press.
Jones, Ronald W. (1965). ―The Structure of Simple General Equilibrium Models‖. Journal of
Political Economy, V.73-#6, pp. 557-72.
____ (1967). ―International Capital Movements and Theory of Tariffs and Trade‖. Quarterly
Journal of Economics, V.81-#1, pp. 1-38.
____ (1970). ―The Role of Technology in the Theory of International Trade‖. In R. Vernon ed,
The Technology Factor in International Trade, New York,: Columbia University
Press\NBER, pp. 73-92.
____ (1971). ―A Three Factor Model in Theory, Trade and History‖. In J. Bhagwati, R. W.
Jones, R. A. Mundell and J. Vanek eds, Trade, Balance of Payments and Growth: Essays
in Honor of Charles P. Kindleberger, Amsterdam: North-Holland, pp. 3-21.
~ 100 ~
____ (1980). ―Comparative and Absolute Advantage‖. Swiss Journal of Economics and
Statistics, V.116-#3, pp. 235-60.
____ (1985). ―A Theorem on Income Distribution in a Small Open-Economy‖. Journal of
International Economics, V.18-#1-2, pp. 171-76.
____ (1989). ―Co-Movements in Relative Commodity Prices and International Capital Flows: A
Simple Model‖. Economic Inquiry, V.27-#1, pp. 131-41.
____ (1992b). ―Jointness in Production and Factor-Price Equalization‖. Review of International
Economics, V.1-#1, pp. 10-18.
Jones, Ronald W. and Fumio Dei (1983). ―International Trade and Foreign Investment: A
Simple-Model‖. Economic Inquiry, V.21-#4, pp. 449-64.
Jones, Ronald W. and Stephen T. Easton (1983). ―Factor Intensities and Factor Substitution in
General Equilibrium‖. Journal of International Economics, V.15-#1-2, pp. 65-99.
Jones, Ronald W. and Roy J. Ruffin (1975). ―Trade Patterns with Capital Mobility‖. In M.
Parkin and A. R. Nobay eds, Current Economic Problems, Cambridge: Cambridge
University Press, pp. 307-32.
Jones, Ronald W. and Jose Scheinkman (1977). ―Relevance of 2-Sector Production-Model in
Trade Theory‖. Journal of Political Economy, V.85-#5, pp. 909-35.
Juhn, Chinhui; Kevin M. Murphy and Robert H. Topel (1991). ―Why Has the Natural Rate of
Unemployment Increased over Time‖. Brookings Papers on Economic Activity, 2, pp. 75142.
Kahanec, Martin and Klaus F. Zimmermann (2009). ―International Migration, Ethnicity and
Economic Inequality‖. In W. Salverda, B. Nolan and T. Smeeding eds, Oxford Handbook
on Economic Inequality, Oxford: Oxford University Press, pp. 455-90.
Kandogan, Yener (2009). ―Immigrants, Cross-Cultural Communication and Export Performance:
The Swiss Case‖. European Journal of International Management, V.3-#3, pp. 393-410.
Karemera, David; Victor I. Oguledo and Bobby Davis (2000). ―A Gravity Model Analysis of
International Migration to North America‖. Applied Economics, V.32-#13, pp. 1745-55.
Katz, Eliakim and Oded Stark (1986). ―Labor Migration and Risk-Aversion in Less Developed
Countries‖. Journal of Labor Economics, V.4-#1, pp. 134-49.
Katz, Lawrence F. and Kevin M. Murphy (1992). ―Changes in Relative Wages, 1963-1987:
Supply and Demand Factors‖. Quarterly Journal of Economics, V.107-#1, pp. 35-78.
Kemnitz, Alexander (2002). ―On the Political Economy of Low Skilled Immigration and the
Welfare State‖. International Tax and Public Finance, V.9-#4, pp. 423-34.
Kemp, Murray C. (1964). The Pure Theory of International Trade. Prentice-Hall.
____ (1966). ―Gain from International Trade and Investment: A Neo-Heckscher-Ohlin
Approach‖. American Economic Review, V.56-#4, pp. 788-809.
Khoo, Siew-Ean (2002). ―Immigration Issues in Australia‖. Journal of Population Research,
V.Special issue-#, pp. 67-78.
Kim, Sukoo (1998). ―Economic Integration and Convergence: U.S. Regions, 1840-1990‖.
Journal of Economic History, V.58-#3, pp. 659-83.
____ (1999). ―Regions, Resources, and Economic Geography: Sources of US Regional
Comparative Advantage, 1880-1987‖. Regional Science and Urban Economics, V.29-#1,
pp. 1-32.
King, Allan G.; B. Lindsay Lowell and Frank D. Bean (1986). ―The Effects of Hispanic
Immigrants on the Earnings of Native Hispanic Americans‖. Social Science Quarterly,
V.67-#4, pp. 673-89.
~ 101 ~
Kitschelt, Herbert and Anthony J. McGann (1995). The Radical Right in Western Europe: A
Comparative Analysis. Ann Arbor: University of Michigan Press.
Kohli, Ulrich (1991). Technology, Duality, and Foreign Trade: The Gnp Function Approach to
Modeling Imports and Exports. Ann Arbor: University of Michigan Press.
____ (1993). ―International Labor Mobility and the Demand for Imports‖. Swiss Journal of
Economics and Statistics, V.129-#, pp. 547-61.
____ (1999). ―Trade and Migration: A Production Theory Approach‖. In R. Faini, J. de Melo and
K. F. Zimmermann eds, Migration: The Controversies and the Evidence, Cambridge:
Cambridge University Press, pp.
____ (2002). ―Migration and Foreign Trade: Further Results‖. Journal of Population Economics,
V.15-#2, pp. 381-87.
Kondoh, Kenji (1999). ―Permanent Migrants and Cross-Border Workers: The Effects on the Host
Country‖. Journal of Regional Science, V.39-#3, pp. 467-78.
Krauss, Melvyn B. (1976). ―Economics of Guest Worker Problem - Neo Heckscher-Ohlin
Approach‖. Scandinavian Journal of Economics, V.78-#3, pp. 470-76.
Kritz, Mary M. and Douglas T. Gurak (2001). ―The Impact of Immigration on the Internal
Migration of Natives and Immigrants‖. Demography, V.38-#1, pp. 133-45.
Krugman, Paul R. (1991). ―Increasing Returns and Economic Geography‖. Journal of Political
Economy, V.99-#3, pp. 483-99.
Kugler, Adriana D. and Mutlu Yuksel (2008). ―Effects of Low-Skilled Immigration on U.S.
Natives: Evidence from Hurricane Mitch‖. NBER Working Paper # #14293
Kuhn, Peter and Ian Wooton (1991). ―Immigration, International Trade and the Wages of Native
Workers‖. In J. M. Abowd and R. B. Freeman eds, Immigration, Trade and Labor
Markets, Chicago: University of Chicago Press/NBER, pp. 285-304.
Lalonde, Robert J. and Robert H. Topel (1991). ―Labor Market Adjustments to Increased
Migration‖. In J. M. Abowd and R. B. Freeman eds, Immigration, Trade and the Labor
Market, Chicago: University of Chicago Press/NBER, pp. 167-99.
____ (1997). ―Economic Impact of International Migration and the Economic Performance of
Migrants‖. In M. Rosenzweig and O. Stark eds, Handbook of Population and Family
Economics, Amsterdam: North-Holland, pp. 799-850.
Landa, Janet T. (1981). ―A Theory of the Ethnically Homogeneous Middleman Group: An
Institutional Alternative to Contract Law‖. Journal of Legal Studies, V.10-#2, pp. 348-62.
____ (1994). Trust, Ethnicity, and Identity: Beyond the New Institutional Economics of Ethnic
Trading Networks, Contract Law, and Gift-Exchange. Ann Arbor: University of
Michigan Press.
Lau, Lawrence (1986). ―Functional Forms in Econometric Model Building‖. In Z. Griliches and
M. Intriligator eds, Handbook of Econometrics, Amsterdam: Elsevier, pp. 1515-66.
Layard, Richard G.; Olivier J. Blanchard; Rudiger Dornbusch and Paul R. Krugman (1992).
East-West Migration: The Alternatives. Cambridge, Mass.: MIT Press.
Lazear, Edward P. (1999). ―Culture and Language‖. Journal of Political Economy, V.107-#6, pp.
S95-S126.
____ (2000). ―Diversity and Immigration‖. In G. J. Borjas ed, Issues in the Economics of
Immigration, Chicago: University of Chicago Press/NBER, pp. 117-42.
Leamer, Edward E. (1987). ―Paths of Development in the 3-Factor, N-Good General
Equilibrium-Model‖. Journal of Political Economy, V.95-#5, pp. 961-99.
~ 102 ~
____ (1995). The Heckscher-Ohlin Model in Theory and Practice. Princeton, N.J.: International
Finance Section, Department of Economics, Princeton University.
Lee, Ronald D. and Timothy W. Miller (1998). ―The Current Fiscal Impact of Immigrants and
Their Descendants: Beyond the Immigrant Household‖. In J. P. Smith and B. Edmonston
eds, The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects
of Immigration, Washington, DC: National Academy Press, pp. 183-205.
Lee, Woojin and John E. Roemer (2006). ―Racism and Redistribution in the United States: A
Solution to the Problem of American Exceptionalism‖. Journal of Public Economics,
V.90-#6-7, pp. 1027-52.
Lee, Woojin; John E. Roemer and Karine Van der Straeten (2006). ―Racism, Xenophobia, and
Redistribution‖. Journal of the European Economic Association, V.4-#2-3, pp. 446-54.
Lee, Y. T.; V. Ottati and I. Hussain (2001). ―Attitudes toward "Illegal" Immigration into the
United States: California Proposition 187‖. Hispanic Journal of Behavioral Sciences,
V.23-#4, pp. 430-43.
Leers, Theo; Lex Meijdam and Harrie A. A. Verbon (2004). ―Ageing, Migration and
Endogenous Public Pensions‖. Journal of Public Economics, V.88-#1-2, pp. 131-59.
Leeson, Peter T. (2008). ―How Important Is State Enforcement for Trade?‖. American Law and
Economics Review, V.10-#1, pp. 61-89.
Lemnos, Sara and Jonathan Portes (2008). ―New Labour? The Impact of Migration from Central
and Eastern European Countries on the UK Labour Market‖. IZA Discussion Paper #
3756
Lerner, Abba P. (1952). ―Factor Prices and International Trade‖. Economica-New Series, V.19#73, pp. 1-15.
Letouzé, Emmanuel; Mark Purser; Francisco Rodríguez and Matthew Cummins (2009).
―Revisiting the Migration-Development Nexus: A Gravity Model Approach‖. #
Lewer, Joshua J. and Hendrik Van den Berg (2008). ―A Gravity Model of Immigration‖.
Economics Letters, V.99-#1, pp. 164-67.
Lewis, Ethan (2003). ―Local, Open Economies within the US: How Do Industries Resond to
Immigration?‖. Federal Reserve Bank of Philadelphia Working Paper # #04-3
____ (2005). ―Immigration, Skill Mix and Choice of Technique‖. Federal Reserve Bank of
Philidelphia Working Paper # #05-08
____ (2008). ―How Did the Miami Labor Market Absorb the Mariel Immigrants?‖. Federal
Reserve Bank of Philadelphia Working Paper # 04-3
Li, Shaomin and Darryl P. Samsell (2009). ―Why Some Countries Trade More Than Others: The
Effects of the Governance Environment on Trade Flows‖. Corporate Governance, V.17#1, pp. 47-61.
Liu, Hong (2000). ―Globalization, Institutionalization and the Social Foundation of Chinese
Business Networks.‖. In H. W.-c. Yeung and K. Olds eds, Globalization of Chinese
Business Firms, New York: St. Martins, pp. 105-25.
____ (2001). ―Social Capital and Business Networking: A Case Study of Modern Chinese
Transnationalism‖. Southeast Asian Studies, V.39-#3, pp. 357-81.
Longhi, Simonetta; Peter Nijkamp and Jacques Poot (2005). ―A Meta-Analytic Assessment of
the Effect of Immigration on Wages‖. Journal of Economic Surveys, V.19-#3, pp. 45177.
~ 103 ~
Lopez, Ramon and Maurice Schiff (1998). ―Migration and the Skill Composition of the Labour
Force: The Impact of Trade Liberalization in LDCs‖. Canadian Journal of Economics,
V.31-#2, pp. 318-36.
Loury, Glen C. (1977). ―A Dynamic Theory of Racial Income Differences‖. In P. A. Wallace
and A. M. LaMond eds, Women, Minorities, and Employment Discrimination, Lexington:
DC Heath, pp. 153-86.
____ (1981). ―Intergenerational Transfers and the Distribution of Earnings‖. Econometrica,
V.49-#4, pp. 843-67.
Lowell, B. Lindsay (2007). ―Trends in International Migration Flows and Stocks, 1975-2005‖.
OECD Social, Employment and Migration Working Paper # 58
Lucas, Robert E.B. (1993). ―Internal Migration in Developing Countries‖. In M. R. Rosenzweig
and O. Stark eds, Handbook of Population and Family Economics, Amsterdam: NorthHolland, pp. 721-98.
MacDonald, Karin and Bruce E. Cain (1997). ―Nativism, Partisanship and Immigration: An
Analysis of Prop. 187‖. In M. B. Preston, B. E. Cain and S. Bass eds, Racial and Ethnic
Politics in California, V.II, Berkeley, pp. 277-304.
MacDougall, G. D. A. (1960). ―The Benefits and Costs of Private Investment from Abroad: A
Theoretical Approach‖. Oxford Bulletin of Economics and Statistics, V.22-#3, pp. 189211.
MaCurdy, Thomas; Thomas Nechyba and Jay Bhattacharaya (1998). ―An Economic Framework
for Assessing the Fiscal Impacts of Immigration‖. In J. P. Smith and B. Edmonston eds,
The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of
Immigration, Washington, DC: National Academy Press, pp. 13-65.
Mancorda, Marco; Alan Manning and Jonathan Wadsworth (2006). ―The Imact of Immigration
on the Structure of Male Wages: Theory and Evidence from Britain‖. Center for
Economic Performance Discussion Paper # 754
Marcus, Jonathan (1995). The National Front and French Politics: The Resistible Rise of JeanMarie Le Pen. Washington Square, N.Y.: New York University Press.
Markusen, James R. (1983). ―Factor Movements and Commodity Trade as Complements‖.
Journal of International Economics, V.14-#, pp. 341-56.
Markusen, James R. and Lars E. O. Svensson (1985). ―Trade in Goods and Factors with
International Differences in Technology‖. International Economic Review, V.26-#1, pp.
175-92.
Marsden, Peter V. and Nan Lin (1982). Social Structure and Network Analysis. Beverly Hills:
Sage Publications.
Maskus, Keith E. (1991). ―Comparing International Trade Data and Product and National
Characteristics Data for the Analysis of Trade Models‖. In P. Hooper and J. D.
Richardson eds, International Economic Transactions: Issues in Measurement and
Empirical Research, Chicago: University of Chicago Press/NBER, pp. 17-56.
Massey, Douglas S. (1990). ―The Social and Economic Origins of Migration‖.‖. Annals AAPSS,
510, pp. 60-72.
____ (2008). New Faces in New Places: The Changing Geography of American Immigration.
New York: Russell Sage Foundation.
Massey, Douglas S.; Rafael Alarcón; Jorge Durand and Humberto Gonzalez (1987). Return to
Aztlan: The Social Process of International Migration from Western Mexico. Berkeley:
University of California Press.
~ 104 ~
Massey, Douglas S.; Joaquin Arango; Graeme Hugo; Ali Kouaouci; Adela Pellegrino and J.
Edward Taylor (1998). Worlds in Motion: Understanding International Migration at the
End of the Millenium. Oxford: Oxford University Press.
Massey, Douglas S. and Kristen E. Espinosa (1997). ―What‘s Driving Mexico-U.S. Migration? A
Theoretical, Empirical, and Policy Analysis‖. American Journal of Sociology, V.102-#4,
pp. 939-99.
Mayda, Anna Maria (2006). ―Who Is against Immigration? A Cross-Country Investigation of
Individual Attitudes toward Immigrants‖. Review of Economics and Statistics, V.88-#3,
pp. 510-30.
____ (2008a). ―International Migration: A Panel Data Analysis of the Determinants of Bilateral
Flows‖. Journal of Population Economics, V.forthcoming-#.
____ (2008b). ―Why Are People More Pro-Trade Than Pro-Migration?‖. Economics Letters,
V.101-#3, pp. 160-63.
Mayer, Wolfgang (1974). ―Short-Run and Long-Run Equilibrium for a Small Open Economy‖.
Journal of Political Economy, V.82-#5, pp. 955-67.
Mayr, Karin (2007). ―Immigration and Income Redistribution: A Political Economy Analysis‖.
Public Choice, V.131-#1-2, pp. 101-16.
Mazza, Isidoro and Frans van Winden (1996). ―A Political Economic Analysis of Labor
Migration and Income Redistribution‖. Public Choice, V.88-#3-4, pp. 333-63.
McCallum, John (1995). ―National Borders Matter: Canada-Us Regional Trade Patterns‖.
American Economic Review, V.85-#3, pp. 615-23.
McIntosh, Molly F. (2008). ―Measuring the Labor Market Impacts of Hurricane Katrina
Migration: Evidence from Houston, Texas‖. American Economic Review, V.98-#2, pp.
54-57.
McKenzie, Lionel W. (1955). ―Equality of Factor Prices in World Trade‖. Econometrica, V.23#3, pp. 239-57.
Meltzer, Allan H. and Scott F. Richard (1981). ―A Rational Theory of the Size of Government‖.
Journal of Political Economy, V.89-#5, pp. 914-27.
Meyer, Bruce D. (1995). ―Natural and Quasi-Experiments in Economics‖. Journal of Business &
Economic Statistics, V.13-#2, pp. 151-61.
Michel, P.; P. Pestieau and J. P. Vidal (1998). ―Labor Migration and Redistribution with
Alternative Assimilation Policies: The Small Economy Case‖. Regional Science and
Urban Economics, V.28-#3, pp. 363-77.
Miguet, Florence (2008). ―Voting About Immigration Policy: What Does the Swiss Experience
Tell Us?‖. European Journal of Political Economy, V.24-#3, pp. 628-41.
Millimet, Daniel L. and Thomas Osang (2007). ―Do State Borders Matter for US Intranational
Trade ?: The Role of History and Internal Migration‖. Canadian Journal of Economics,
V.40-#1, pp. 93-126.
Mincer, Jacob (1978). ―Family Migration Decisions‖. Journal of Political Economy, V.86-#5,
pp. 749-73.
Moenius, Johannes; James E. Rauch and Vitor Trindade (2007). ―Gravity and Matching‖.
University of California, San Diego #
Molle, Willem and Aad van Mourik (1988). ―International Movements of Labor under
Conditions of Economic Integration: The Case of Western Europe‖. Journal of Common
Market Studies, V.26-#3, pp. 317-42.
~ 105 ~
Moretti, Enrico (1999). ―Social Networks and Migrations: Italy 1876-1913‖. International
Migration Review, V.33-#3, pp. 640-57.
Moretto, Michele and Sergio Vergalli (2008). ―Migration Dynamics‖. Journal of Economics,
V.93-#3, pp. 223-65.
Mundell, Robert A. (1957). ―International Trade and Factor Mobility‖. American Economic
Review, V.47-#3, pp. 321-35.
Mundra, Kusum (2005). ―Immigration and International Trade: A Semiparametric Empirical
Investigation‖. Journal of International Trade & Economic Development, V.14-#1, pp.
65–91.
Murat, Marina and Barbara Pistoresi (2009). ―Migrant Networks: Empirical Implications for the
Italian Bilateral Trade‖. International Economic Journal, V.23-#3, pp. 371-90.
Murphy, Kevin M.; Mark Plant and Finis Welch (1988). ―Cohort Size and Earnings in the USA‖.
In R. Lee, W. B. Arthur and G. Rodgers eds, Economics of Changing Age Distributions
in Developed Countries, New York: Oxford University Press, pp. 39-58.
Murphy, Kevin M. and Finis Welch (1991). ―The Role of International Trade in Wage
Differentials‖. In M. Kosters ed, Workers and Their Wages: Changing Patterns in the
United States, Washington, DC: American Enterprise Institute, pp. 39-69.
Mussa, Michael (1974). ―Tariffs and Distribution of Income: Importance of Factor Specificity,
Substitutability, and Intensity in Short and Long Run‖. Journal of Political Economy,
V.82-#6, pp. 1191-203.
Myers, Gordon M. and Yorgos Y. Papageorgiou (2000). ―Immigration Control and the Welfare
State‖. Journal of Public Economics, V.75-#2, pp. 183-207.
Nannestad, Peter (2007). ―Immigration and Welfare States: A Survey of 15 Years of Research‖.
European Journal of Political Economy, V.23-#2, pp. 512-32.
Neary, J. Peter (1978). ―Short-Run Capital Specificity and Pure Theory of International Trade‖.
Economic Journal, V.88-#351, pp. 488-510.
____ (1985). ―International Factor Mobility, Minimum Wage Rates, and Factor-Price
Equalization: A Synthesis‖. Quarterly Journal of Economics, V.100-#3, pp. 551-70.
____ (1989). ―Immigration and Real Wages‖. Economics Letters, V.30-#2, pp. 171-74.
____ (1995). ―Factor Mobility and International Trade‖. Canadian Journal of Economics, V.28#Special Issue, pp. S4-S23.
____ (2001). ―Of Hype and Hyperbolas: Introducing the New Economic Geography‖. Journal of
Economic Literature, V.39-#2, pp. 536-61.
Nelson, Charles R. and Richard Startz (1990). ―Some Further Results on the Exact Small Sample
Properties of the Instrumental Variable Estimator‖. Econometrica, V.58-#4, pp. 967-76.
Nelson, Douglas R. and Yongsheng Xu (2001). ―Political Economy of Illegal Migration‖. #
Nelson, Phillip (1959). ―Migration, Real Income and Information‖. Journal of Regional Science,
V.1-#2, pp. 43-74.
Nikaido, Hukukane (1968). Convex Structures and Economic Theory. New York,: Academic
Press.
Norman, Victor D. and Anthony J. Venables (1995). ―International Trade, Factor Mobility, and
Trade Costs‖. Economic Journal, V.105-#433, pp. 1488-504.
Nunn, Nathan (2007). ―Relationship-Specificity, Incomplete Contracts, and the Pattern of
Trade‖. Quarterly Journal of Economics, V.122-#2, pp. 569-600.
O'Rourke, Kevin H. and Richard Sinnott (2006). ―The Determinants of Individual Attitudes
Towards Immigration‖. European Journal of Political Economy, V.22-#4, pp. 838-61.
~ 106 ~
Ohyama, Michihiro (1989). ―Factor Endowments and the Pattern of Commodity and Factor
Trade‖. Keio Economic Studies, V.26-#1, pp. 19-29.
Opp, Marcus M.; Hugo F. Sonnenschein and Christis G. Tombazos (2009). ―Rybczynski's
Theorem in the Heckscher-Ohlin World: Anything Goes‖. Journal of International
Economics, V.79-#1, pp. 137-42.
Orrenius, Pia M. and Madeline Zavodny (2007). ―Does Immigration Affect Wages? A Look at
Occupation-Level Evidence‖. Labour Economics, V.14-#5, pp. 757-73.
Ortega, Francesc and Giovanni Peri (2009). ―The Causes and Effects of International Migrations:
Evidence from OECD Countries 1980-2005‖.
Ottaviano, Gianmarco I.P. and Giovanni Peri (2006). ―Rethinking the Effects of Immigration on
Wages‖. NBER Working Paper # #12497
____ (2008). ―Immigration and National Wages: Clarifying the Theory and the Empirics‖. NBER
Working Paper # #14188
Ottaviano, Gianmarco I.P. and Diego Puga (1998). ―Agglomeration in the Global Economy: A
Survey of the 'New Economic Geography'‖. World Economy, V.21-#6, pp. 707-31.
Overman, Henry G. and Diego Puga (2002). ―Unemployment Clusters across Europe's Regions
and Countries‖. Economic Policy, 34, pp. 115-47.
Palloni, A.; Douglas S. Massey; M. Ceballos; K. Espinosa and M. Spittel (2001). ―Social Capital
and International Migration: A Test Using Information on Family Networks‖. American
Journal of Sociology, V.106-#5, pp. 1262-98.
Parasnis, Jaai (2010). ―Estimating the Relationship between Immigrant and Native Workers in
Australia: A Production Theory Approach‖. Australian Economic Papers, V.49-#1, pp.
73-85.
Parsons, Chris (2005). ―Quantifying the Trade-Migration Nexus of the Enlarged EU: A Comedy
of Errors or Much Ado About Nothing? ‖. Sussex Centre for Migration Research
Working Papers # 27
Parthasarathy, T. (1983). On Global Univalence Theorems. Berlin ; New York: Springer-Verlag.
Partridge, Jamie and Hartley Furtan (2008). ―Immigration Wave Effects on Canada's Trade
Flows‖. Canadian Public Policy-Analyse De Politiques, V.34-#2, pp. 193-214.
Pedersen, Peder J. ; Mariola Pytlikova and Nina Smith (2006). ―Migration into OECD Countries,
1990-2006‖. In C. Parsons and T. Smeeding eds, Immigration and the Transformation of
Europe, Cambridge: Cambridge University Press, pp. 43-84.
Peri, Giovanni (2007). ―Immigrants' Complementarities and Native Wages: Evidence from
California‖. NBER Working Papers # #12956
____ (2009). ―Rethinking the Area Approach: Immigrants and the Labor Market in California,
1960-2005‖. University of California at Davis, Department of Economics Working Paper
# 09-13
Peri, Giovanni and Chad Sparber (2008). ―The Fallacy of Crowding Out: A Note on 'Native
Internal Migration and the Labor Market Impact of Immigration'‖. Department of
Economics, Colgate University Working Paper # 2008-01
____ (2009). ―Task Specialization, Immigration and Wages‖. American Economic Journal:
Applied Economics, V.1-#3, pp. 135-69.
Perroni, Carlo and Thomas F. Rutherford (1995). ―Regular Flexibility of Nested Ces Functions‖.
European Economic Review, V.39-#2, pp. 335-43.
Phillips, J. A. and Douglas S. Massey (2000). ―Engines of Immigration: Stocks of Human and
Social Capital in Mexico‖. Social Science Quarterly, V.81-#1, pp. 33-48.
~ 107 ~
Piperakis, Andromachi S..; Chris Milner and Peter W. Wright (2003). ―Immigration, Trade
Costs, and Trade: Gravity Evidence for Greece‖. Journal of Economic Integration, V.18#4, pp. 750-62.
Pischke, Jörn-Steffen and Johannes Velling (1997). ―Employment Effects of Immigration to
Germany: An Analysis Based on Local Labor Markets‖. Review of Economics and
Statistics, V.79-#4, pp. 594-604.
Polanyi, Karl (1957). Trade and Market in the Early Empires; Economies in History and Theory.
Glencoe, Ill.,: Free Press.
____ (1968). Primitive, Archaic, and Modern Economies; Essays of Karl Polanyi. Garden City,
N.Y.,: Anchor Books.
Poros, Maritsa V. (2002). ―The Role of Migrant Networks in Linking Local Labour Markets:
The Case of Asian Indian Migration to New York and London‖. Global Networks, V.1#3, pp. 243-60.
Portes, Alejandro and J. Sensenbrenner (1993). ―Embeddedness and Immigration: Notes on the
Social Determinants of Economic Action‖. American Journal of Sociology, V.98-#6, pp.
1320-50.
Portes, Richard and Helene Rey (2005). ―The Determinants of Cross-Border Equity Flows‖.
Journal of International Economics, V.65-#2, pp. 269-96.
Puga, Diego (1999). ―The Rise and Fall of Regional Inequalities‖. European Economic Review,
V.43-#2, pp. 303-34.
Purvis, Douglas D. (1972). ―Technology, Trade and Factor Mobility‖. Economic Journal, V.82#327, pp. 991-99.
Quah, Danny T. (1996). ―Regional Convergence Clusters across Europe‖. European Economic
Review, V.40-#3-5, pp. 951-58.
Rakowski, James J. (1970). ―Capital Mobility in a Tariff-Ridden International Economy‖.
American Economic Review, V.60-#4, pp. 753-60.
Ranjan, Priya and Jae Young Lee (2007). ―Contract Enforcement and International Trade‖.
Economics & Politics, V.19-#2, pp. 191-218.
Raphael, Steven and Eugene Smolensky (2009a). ―Immigration and Poverty in the United
States‖. American Economic Review, V.99-#2, pp. 41-44.
____ (2009b). ―Immigration and Poverty in the United States‖. In S. Danziger and M. Cancian
eds, Changing Poverty, Changing Policies, New York: Russell Sage Foundation, pp.
122-50.
Rauch, James E. (1999). ―Networks Versus Markets in International Trade‖. Journal of
International Economics, V.48-#1, pp. 7-35.
____ (2001). ―Business and Social Networks in International Trade‖. Journal of Economic
Literature, V.39-#4, pp. 1177-203.
Rauch, James E. and Alessandra Casella (2003). ―Overcoming Informational Barriers to
International Resource Allocation: Prices and Ties‖. Economic Journal, V.113-#484, pp.
21-42.
Rauch, James E. and Vitor Trindade (2002). ―Ethnic Chinese Networks in International Trade‖.
Review of Economics and Statistics, V.84-#1, pp. 116-30.
Ravenstein, Ernest G. (1885). ―The Law of Migration (Part I)‖. Journal of the Royal Statistical
Society of London, V.48-#2, pp. 167-235.
____ (1889). ―The Law of Migration (Part II)‖. Journal of the Royal Statistical Society, V.52-#2,
pp. 241-305.
~ 108 ~
Razin, Assaf and Efraim Sadka (1994). ―International Migration and International Trade‖. In M.
R. Rosenzweig and O. Stark eds, Handbook of Population and Family Economics, Vol. 1,
North-Holland Publishers, Amsterdam: North-Holland, pp.
____ (1999). ―Migration and Pension with International Capital Mobility‖. Journal of Public
Economics, V.74-#1, pp. 141-50.
____ (2001). ―Interactions between International Migration and the Welfare State‖. In S. Djajie
ed, International Migration: Trends, Policies and Economic Impact, London: Routledge,
pp. 69-88.
Razin, Assaf; Efraim Sadka and with Chang Woon Nam (2005). The Decline of the Welfare
State: Demography and Globalization. Cambridge: MIT Press.
Razin, Assaf; Efraim Sadka and Phillip Swagel (2002). ―Tax Burden and Migration: A Political
Economy Theory and Evidence‖. Journal of Public Economics, V.85-#2, pp. 167-90.
Redding, Stephen and Mercedes Vera-Martin (2006). ―Relative Endowments and Production in
European Regions‖. Review of World Economics, V.142-#1, pp. 1-32.
Rees, A. (1966). ―Information Networks in Labor Markets‖. American Economic Review, V.56#2, pp. 559-66.
Reimers, David M. (1998). Unwelcome Strangers: American Identity and the Turn against
Immigration. New York: Columbia University Press.
Rivera-Batiz, Francisco L. (1982). ―Nontraded Goods and the Pure Theory of InternationalTrade with Equal Numbers of Goods and Factors‖. International Economic Review,
V.23-#2, pp. 401-09.
____ (1983). ―The Economics of the to and Fro Migrant - Some Welfare-Theoretical
Considerations‖. Scandinavian Journal of Economics, V.85-#3, pp. 403-13.
Rivera-Batiz, Francisco L. and Selig Sechzer (1991). ―Substitution and Complementarity
between Immigrant and Native Labor in the U.S.‖. In F. Rivera-Batiz, S. Sechzer and I.
N. Gang eds, U.S. Immigration Policy Reform in the 1980s, Westport: Praeger, pp. 89116.
Rodriguez, Carlos Alfredo (1975). ―International Factor Mobility, Nontraded Goods, and
International Equalization of Prices of Goods and Factors‖. Econometrica, V.43-#1, pp.
115-24.
Roemer, John E.; Woojin Lee and Karine Van der Straeten (2007). Racism, Xenophobia, and
Distribution: Multi-Issue Politics in Advanced Democracies. New York: Harvard
University Press\Russell Sage foundation.
Roemer, John E. and Karine Van der Straeten (2005). ―Xenophobia and the Size of the Public
Sector in France: A Politico-Economic Analysis‖. Journal of Economics, V.86-#2, pp.
95-144.
____ (2006). ―The Political Economy of Xenophobia and Distribution: The Case of Denmark‖.
Scandinavian Journal of Economics, V.108-#2, pp. 251-77.
Rothman, E. S. and Thomas J. Espenshade (1992). ―Fiscal Impacts of Immigration to the United
States‖. Population Index, V.58-#3, pp. 381-415.
Roy, A.D. (1951). ―Some Thoughts on the Distribution of Earnings‖. Oxford Economic Papers,
V.3-#2, pp. 135-46.
Rübel, Gerhard (1994). ―Economic Welfare, International Factor Mobility and Non-Tradeable
Goods‖. Zeitschrift fur Wirtschafts- und Sozialwissenschaften, V.114-#1, pp. 25-40.
Ruffin, Roy J. (1981). ―Trade and Factor Movements with 3 Factors and 2 Goods‖. Economics
Letters, V.7-#2, pp. 177-82.
~ 109 ~
____ (1984). ―International Factor Movements‖. In R. W. Jones and P. Kenen eds, Handbook of
International Economics, Amsterdam: Elsevier, pp. 237-88.
Rybczynski, T.M (1955). ―Factor Endowments and Relative Commodity Prices‖. Economica,
V.22-#, pp. 336-41.
Saiz, Albert (2003). ―Room in the Kitchen for the Melting Pot: Immigration and Rental Prices‖.
Review of Economics and Statistics, V.85-#3, pp. 502-21.
Samuelson, Paul A. (1948). ―International Trade and the Equalisation of Factor Prices‖.
Economic Journal, V.58-#230, pp. 163-84.
____ (1949). ―International Factor Price Equalization Once Again‖. Economic Journal, V.59#234, pp. 181-97.
____ (1953/4). ―Prices of Factors and Goods in General Equilibrium‖. Review of Economic
Studies, V.21-#1, pp. 1-20.
____ (1971). ―Exact Hume-Ricardo-Marshall Model of International Trade‖. Journal of
International Economics, V.1-#1, pp. 1-18.
____ (1992). ―Factor-Price Equalization by Trade in Joint and Non-Joint Production‖. Review of
International Economics, V.1-#1, pp. 1-18.
Sassen, Saskia (1999). Guests and Aliens. New York: New Press : Distributed by W.W. Norton.
Sato, K. (1967). ―2-Level Constant-Elasticity-of-Substitution Production Function‖. Review of
Economic Studies, V.34-#2, pp. 201-18.
Sato, Ryuzo and Tetsunori Koizumi (1973). ―On the Elasticities of Substitution and
Complementarity‖. Oxford Economic Papers, V.25-#1, pp. 44-56.
Scheve, Kenneth F. and Matthew J. Slaughter (2001). ―Labor Market Competition and Individual
Preferences over Migration Policy‖. Review of Economics and Statistics, V.83-#1, pp.
133-45.
Schiff, Maurice (1999). ―South-North Migration and Trade: A Survey‖. World Bank, Policy
Research Working Paper Series # 1696
Scholten, Ulrich and Marcel Thum (1996). ―Public Pensions and Immigration Policy in a
Democracy‖. Public Choice, V.87-#3-4, pp. 347-61.
Schott, Peter K. (2003). ―One Size Fits All? Heckscher-Ohlin Specialization in Global
Production‖. American Economic Review, V.93-#3, pp. 686-708.
Schwellnus, Cyrille (2008). ―The Non-Traded Sector, Lobbying, and the Choice between the
Customs Union and the Common Market‖. Economics and Politics, V.20-#3, pp. 361-90.
Shughart, William F., II; Robert D. Tollison and Mwangi S. Kimenyi (1986). ―The Political
Economy of Immigration Restriction‖. Yale Journal on Regulation, V.4-#1, pp. 79-97.
Silberberg, Eugene and Wing Suen (2001). The Structure of Economics: A Mathematical
Analysis. Boston, Mass.: McGraw-Hill.
Sjaastad, Larry A. (1962). ―The Costs and Returns of Human Migration‖. Journal of Political
Economy, V.70-#5, pp. 80-93.
Smith, T.E. (1975). ―A Choice Theory of Spatial Interaction‖. Regional Science and Urban
Economics, V.5-#2, pp. 137-76.
____ (1976). ―Spatial Discounting and the Gravity Hypothesis‖. Regional Science and Urban
Economics, V.6-#, pp. 331-56.
Stark, Oded and David Levhari (1982). ―On Migration and Risk in LDCs‖. Economic
Development and Cultural Change, V.31-#1, pp. 191-96.
Storesletten, Kjetil (2000). ―Sustaining Fiscal Policy through Immigration‖. Journal of Political
Economy, V.108-#2, pp. 300-23.
~ 110 ~
____ (2003). ―Fiscal Implications of Immigration--a Net Present Value Calculation‖.
Scandinavian Journal of Economics, V.105-#3, pp. 487-506.
Suen, Wing (2000). ―Estimating the Effects of Immigration in One City‖. Journal of Population
Economics, V.13-#1, pp. 99-112.
Svensson, Lars E. O. (1984). ―Factor Trade and Goods Trade‖. Journal of International
Economics, V.16-#3-4, pp. 365-78.
Tadesse, Bedassa and Roger White (2008). ―Do Immigrants Counter the Effect of Cultural
Distance on Trade? Evidence from US State-Level Exports‖. Journal of SocioEconomics, V.37-#6, pp. 2304-18
____ (2010). ―Cultural Distance as a Determinant of Bilateral Trade Flows: Do Immigrants
Counter the Effect of Cultural Differences?‖. Applied Economics Letters, V.17-#2, pp.
147-52.
Tai, Silvio H. T. (2009). ―Market Structure and the Link between Migration and Trade‖. Review
of World Economics, V.145-#2, pp. 225-49.
Takayama, Akira (1982). ―On Theorems of General Competitive Equilibrium of Production and
Trade--a Survey of Some Recent Developments in the Theory of International Trade‖.
Keio Economic Studies, V.19-#1, pp. 1-38.
Tawada, Makoto (1989). Production Structure and International Trade. Berlin ; New York:
Springer-Verlag.
Teteryatnikova, Mariya (2008). ―The Effects of Social Networks on Migration Decisions:
Destination Choice and Local Variations in 19th Century Italian Emigration‖. European
University Institute #
Thompson, Henry (1983a). ―Factor Migration and Income Distribution in International Trade‖.
Keio Economic Studies, V.20-#, pp. 65-70.
____ (1983b). ―Trade and International Factor Mobility‖. Atlantic Economic Journal, V.11-#4,
pp. 45-48.
____ (1985). ―Complementarity in a Simple General Equilibrium Production Model‖. Canadian
Journal of Economics, V.18-#3, pp. 616-21.
____ (1987). ―A Review of Advancements in the General Equilibrium Theory of Production and
Trade‖. Keio Economic Studies, V.24-#1, pp. 43-62.
Thompson, Henry and Donald P. Clark (1983). ―Factor Movements with 3 Factors and 2 Goods
in the United States Economy‖. Economics Letters, V.12-#1, pp. 53-60.
____ (1990). ―International Factor Migration and the U.S.‖. Atlantic Economic Journal, V.18-#2,
pp. 74-78.
Thum, Marcel (2004). ―Controlling Migration in an Open Labor Market‖. Public Choice, V.119#3-4, pp. 425-43.
Timmer, A. S. and Jeffrey G. Williamson (1998). ―Immigration Policy Prior to the 1930s: Labor
Markets, Policy Interactions, and Globalization Backlash‖. Population and Development
Review, V.24-#4, pp. 739-71.
Tolbert, C. J. and R. E. Hero (1996). ―Race/Ethnicity and Direct Democracy: An Analysis of
California's Illegal Immigration Initiative‖. Journal of Politics, V.58-#3, pp. 806-18.
Tombazos, Christis G.; Xiaokai Yang and Dingsheng Zhang (2005). ―A Neo-Heckscher-Ohlin
Model of Trade with Endogenous Production Patterns‖. Economic Record, V.81-#, pp.
S71-S81.
Topel, Robert H. (1986). ―Local Labor Markets‖. Journal of Political Economy, V.94-#3, pp.
S111-S43.
~ 111 ~
____ (1994a). ―Regional Labor-Markets and the Determinants of Wage Inequality‖. American
Economic Review, V.84-#2, pp. 17-22.
____ (1994b). ―Wage Inequality and Regional Labor Market Performance in the US‖. In T.
Tachibanaki ed, Labor Market and Economic Performance: Europe, Japan and the USA,
New York: St. Martins, pp. 93-127.
Travis, William Penfield (1964). The Theory of Trade and Protection. Cambridge,: Harvard
University Press.
Trefler, Daniel (1995). ―The Case of the Missing Trade and Other Mysteries‖. American
Economic Review, V.85-#5, pp. 1029-46.
Turrini, Alessandro Antonio and Tanguy van Ypersele (2006). ―Legal Costs as Barriers to
Trade‖. CEPR Discussion Papers # 5751
Uekawa, Yasuo (1972). ―Existence of Incomplete Specialization in International Trade with
Capital Mobility‖. Journal of International Economics, V.2-#1, pp. 1-23.
United Nations, (UNPOP) (2009a). ―International Migration Report 2006: A Global
Assessment‖. In ed. P. D. Department of Economic and Social Affairs. New York:
United Nations.
____ (2009b). ―Trends in International Migrant Stock: The 2008 Revision‖. In ed. P. D.
Department of Economic and Social Affairs. New York: United Nations.
Varian, Hal R. (1992). Microeconomic Analysis. New York: Norton.
Venables, Anthony (1999). ―Trade Liberalisation and Factor Mobility: An Overview‖. In R.
Faini, J. deMelo and K. F. Zimmermann eds, Migration: The Controversies and the
Evidence, Cambridge: Cambridge University Press, pp. 23-47.
Venturini, Alessandra and Claudia Villosio (2006). ―Labour Market Effects of Immigration into
Italy: An Empirical Analysis‖. International Labour Review, V.145-#1/2, pp. 91-118.
Wagner, Don; Keith Head and John Ries (2002). ―Immigration and the Trade of Provinces‖.
Scottish Journal of Political Economy, V.49-#5, pp. 507-25.
Wasserman, Stanley and Katherine Faust (1994). Social Network Analysis: Methods and
Applications. Cambridge: Cambridge University Press.
Wegge, Simone A. (1998). ―Chain Migration and Information Networks: Evidence from
Nineteenth-Century Hesse-Cassel‖. Journal of Economic History, V.58-#4, pp. 957-86.
Weidenbaum, Murray L. and Samuel Hughes (1996). The Bamboo Network: How Expatriate
Chinese Entrepreneurs Are Creating a New Economic Superpower in Asia. New York:
Martin Kessler Books.
Welch, Finis (1979). ―Effects of Cohort Size on Earnings: Baby Boom Babies Financial Bust‖.
Journal of Political Economy, V.87-#5, pp. S65-S97.
Wellisch, Dietmar and Uwe Walz (1998). ―Why Do Rich Countries Prefer Free Trade over Free
Migration? The Role of the Modern Welfare State‖. European Economic Review, V.42#8, pp. 1595-612.
Wellisch, Dietmar and David E. Wildasin (1996). ―Decentralized Income Redistribution and
Immigration‖. European Economic Review, V.40-#1, pp. 187-217.
Wellman, Barry and Stephen D. Berkowitz (1988). Social Structures: A Network Approach.
Cambridge Cambridge University Press.
White, Harrison C. (1992). Identity and Control : A Structural Theory of Social Action.
Princeton, N.J.: Princeton University Press.
____ (2002). Markets from Networks : Socioeconomic Models of Production. Princeton, N.J.:
Princeton University Press.
~ 112 ~
White, Michael J. and Peter R. Mueser (1988). ―Implications of Boundary Choice for the
Measurement of Residential Mobility‖. Demography, V.25-#3, pp. 443-59.
White, Roger (2007a). ―An Examination of the Danish Immigrant-Trade Link‖. International
Migration, V.45-#5, pp. 61-86.
____ (2007b). ―Immigrant-Trade Links, Transplanted Home Bias and Network Effects‖. Applied
Economics, V.39-#7, pp. 839-52.
____ (2009). ―Immigration, Trade and Home Country Development: State-Level Variation in the
US Immigrant–Export Link‖. Journal of International Migration and Integration, V.10#2, pp. 121-43.
White, Roger and Bedassa Tadesse (2007). ―Immigration Policy, Cultural Pluralism and Trade:
Evicence from the White Australia Policy‖. Pacific Economic Review, V.12-#4, pp. 489509.
____ (2008a). ―Cultural Distance and the US Immigrant-Trade Link‖. World Economy, V.31-#8,
pp. 1078-96.
____ (2008b). ―Immigrants, Cultural Distance and U.S. State-Level Exports of Cultural Products
‖. North American Journal of Economics and Finance, V.19-#3, pp. 331-48.
Wildasin, David E. (1991). ―Income Redistribution in a Common Labor Market‖. American
Economic Review, V.81-#4, pp. 757-74.
____ (1994). ―Income Redistribution and Migration‖. Canadian Journal of Economics, V.27-#3,
pp. 637-56.
Williamson, Oliver E. (1975). Markets and Hierarchies : Analysis and Antitrust Implications : A
Study in the Economics of Internal Organization. New York: Free Press.
____ (1985). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting.
New York: Free Press.
____ (1996). The Mechanisms of Governance. New York: Oxford University Press.
Winkelmann, Rainer and Klaus F. Zimmermann (1993). ―Ageing, Migration and Labour
Market‖. In P. Johnson and K. F. Zimmermann eds, Labour Markets in Ageing Europe,
Cambridge: Cambridge University Press, pp. 255-83.
Winter-Ebmer, Rudolf and Josef Zweimüller (1996). ―Immigration and the Earnings of Young
Native Workers‖. Oxford Economic Papers-New Series, V.48-#3, pp. 473-91.
____ (1999a). ―Do Immigrants Displace Young Native Workers: The Austrian Experience‖.
Journal of Population Economics, V.12-#2, pp. 327-40.
____ (1999b). ―Immigration, Trade and Austrian Unemployment‖. In M. Landesmann and K.
Pichelmann eds, Unemployment in Europe, New York: St. Martins, pp. 250-67.
Wong, Kar-yiu (1986). ―Are International Trade and Factor Mobility Substitutes‖. Journal of
International Economics, V.21-#1-2, pp. 25-43.
____ (1988). ―International Factor Mobility and the Volume of Trade: An Empirical Study‖. In
R. C. Feenstra ed, Empirical Methods for International Trade, Cambridge: MIT Press,
pp. 231-50.
____ (1995). International Trade in Goods and Factor Mobility. Cambridge, Mass.: MIT Press.
Wong, Siu-lun and Janet W. Salaff (1998). ―Network Capital: Emigration from Hong Kong‖.
British Journal of Sociology, V.49-#3, pp. 358-74.
Woodland, Alan D. (1982). International Trade and Resource Allocation. Amsterdam: NorthHolland.
____ (1983). ―Stability, Capital Mobility and Trade‖. International Economic Review, V.24-#2,
pp. 475-83.
~ 113 ~
Wright, Richard A.; Mark Ellis and Michael Reibel (1997). ―The Linkage between Immigration
and Internal Migration in Large Metropolitan Areas in the United States‖. Economic
Geography, V.73-#2, pp. 234-54.
Xiang, Chong (2007). ―Diversification Cones, Trade Costs and Factor Market Linkages‖.
Journal of International Economics, V.71-#2, pp. 448-66.
Yang, Dean (2008). ―International Migration, Remittances, and Household Investment: Evidence
from Philippine Migrants‘ Exchange Rate Shocks‖. Economic Journal, V.118-#528, pp.
591-630.
Yoshida, Chisato and Alan D. Woodland (2005). The Economics of Illegal Immigration. New
York: Palgrave Macmillan.
Zimmermann, Klaus F. (1995). ―Tackling the European Migration Problem‖. Journal of
Economic Perspectives, V.9-#2, pp. 45-62.
Zipf, George K. (1946). ―The P1 P2/D Hypothesis: On the Intercity Movement of Persons‖.
American Sociological Review, V.11-#6, pp. 677-86.
Zorlu, A. and J. Hartog (2005). ―The Effect of Immigration on Wages in Three European
Countries‖. Journal of Population Economics, V.18-#1, pp. 113-51.
~ 114 ~
~ 115 ~
~ 116 ~
~ 117 ~
~ 118 ~
~ 119 ~
~ 120 ~
~ 121 ~
~ 122 ~
~ 123 ~
~ 124 ~
![Chapter 3 Homework Review Questions Lesson 3.1 [pp. 78 85]](http://s1.studyres.com/store/data/007991817_1-7918028bd861b60e83e4dd1197a68240-150x150.png)