Download Impact of Immigration on Receiving Population

Impact of Immigration on
Labour Outcomes of
Receiving Populations
Econ 495/499
Prof. Nicole M. Fortin
Current Studies
• Theoretical considerations:
– The effect of immigrants on receiving population (called natives in the
US literature) depends on whether immigrants are complements or
substitutes for native workers.
• The effect of immigrants on native wages/employment:
– Local Labour Market (Area Approach): Estimating the effect of
immigration on natives using local labour markets (Card, 1990)
– Occupations as the relevant labour market (Friedberg, 2001)
– Local labour markets interaction with occupation (Federman,
Harrington and Krynski, 2006).
– Skill groups (by education and experience) as the relevant labour
market (Borjas, 2003).
• The effect of immigrants on native innovation (Hunt and Gauthier-Loiselle,
2010; Moser, Voena, and Waldinger, 2012).
The Effect of Immigrants on Natives - Perfect Substitutes
• Influx leads to
decrease in
wages and
employment
among natives
The Effect of Immigrants on Natives - Perfect Substitutes
• The more elastic labour
demand:
• the smaller the fall in
the wage.
• the smaller the fall in
employment of natives.
The Effect of Immigrants on Natives - Perfect Complements
• If immigrants and natives are complements, labour demand for natives
would shift outwards with the arrival of immigrants.
• Natives would gain from immigration
Current Studies
•
•
•
Theoretical considerations:
– The effect of immigrants on receiving population (called natives in the US
literature) depends on whether immigrants are complements or
substitutes for native workers.
The effect of immigrants on native wages/employment:
– Local Labour Market (Area Approach): Estimating the effect of
immigration on natives using local labour markets (Card, 1990)
– Occupations as the relevant labour market (Friedberg, 2001).
– Local labour markets interaction with occupation (Federman, Harrington
and Krynski, 2006).
– Skill groups (by education and experience) as the relevant labour market
(Borjas, 2003).
The effect of immigrants on native innovation (Hunt and Gauthier-Loiselle,
2010; Moser, Voena, and Waldinger, 2012).
The Effect of Immigrants on Native Labour Market
Outcomes
• The effect of immigrants on natives depends on a number of factors:
1) Size of the immigrant influx.
2) Substitutability between natives and immigrants and elasticity of
labour demand.
3) Relative abundance of natives in different skill, education,
occupation, and/or experience groups.
4) General equilibrium effects 1: migration of natives to other markets.
5) General equilibrium effects 2: If labour markets across areas are
perfectly integrated, the law of one price will lead to factor price
equalization (FPE) across areas → wages would be the same in all
areas.
• It is therefore an empirical question which effects predominates
depending on the labour market of interest
Problems in the Empirical Investigation of the Effect of
Immigration on Natives
• The standard regression to estimate the impact of immigration on
employment or wages of natives would be to estimate the following
regression:
𝑤𝑤𝑖𝑖𝑁𝑁 = 𝛽𝛽0 + 𝛽𝛽1 𝑆𝑆𝑖𝑖𝐼𝐼 + 𝜀𝜀𝑖𝑖
where 𝑤𝑤𝑖𝑖𝑁𝑁 is the wage of the native in labour market 𝑖𝑖
𝑆𝑆𝑖𝑖𝐼𝐼 is the immigrant share in labour market 𝑖𝑖
• What are the problems when estimating this equation?
Does More Immigration Cause Lower Wages for Low
Skilled Natives?
Problems in the Empirical Investigation of the Effect of
Immigration on Natives
• The standard regression to estimate the impact of immigration on
employment or wages of natives would be to estimate the following
regression:
𝑤𝑤𝑖𝑖𝑁𝑁 = 𝛽𝛽0 + 𝛽𝛽1 𝑆𝑆𝑖𝑖𝐼𝐼 + 𝜀𝜀𝑖𝑖
1) Endogeneity of migration decision: immigrants are more likely to locate
in labour markets with high labour demand (or increasing labour
demand).
 will normally lead us to underestimate negative effects on natives.
2) Outmigration of natives: Natives may relocate to counteract the lower
demand for native labour.
 will again lead us to underestimate the effect.
Examples of Existing Empirical Studies
• The existing empirical studies differ in what they use as the unit of analysis
(i.e. what is the labour market within which we analyze the effect of
immigration).
1) Local labour markets (Area approaches e.g. Card (1990).
2) Occupation groups: e.g. Friedberg (2001).
3) Local labour markets interaction with occupation: e.g. Federman,
Harrington and Krynski (2006).
4) Groups by education and years of labor market experience: e.g. Borjas
(2003).
• Endogeneity issues is addressed but both Card (1990) and Friedberg
(2001) by choosing “quasi-natural experiment” where immigrants are sent
to receiving area by virtue of a policy fluke!
• Federman, Harrington and Krynski (2006) focus on Vietnamese
manicurists for which the enclave strategy apply quite well
Enclave Strategy to Deal with Endogeneity
• Key Assumption: New immigrants go to the same cities are earlier
immigrants from the same country
• Bartik type of instrument, first used by Altonji and Card (1991) in the
context of immigration
• predicts current share of immigrant in ethnic group e in city c at time t
as follows:
predicted current shareect = total US arrivals t-(t-1) × earlier shareect0
where t0=1980, for example
• example: Filipinos (2nd largest US immigrant group)
– still go to the “naval base” cities
– provides an “exogenous” supply shock (?)
– results confirm simpler cross-city comparisons
The Enclave Effect (First-Stage): Relative Shares of
Filipino Immigrants in Major Cities
Source: Card (2009)
The Enclave Strategy: Wage of Native Dropouts vs
Predicted Relative Inflow of Immigrant Dropouts
Source: Card (2009)
Impact of Highly Skilled Immigration
• Peri (2007) “Higher Education, Innovation and Growth”
• Chellaraj, Maskua and Matoo (2008) “The Contribution of Skilled
Immigration and International Graduate Students to US Innovation”
• Stuen, Mobarak and Maskus (2007) “Foreign PhD Students and
Knowledge Creation at US Universities : Evidence from Enrollment
Fluctuations”
• Paserman (2008) “Do High Skills Immigrants Raise Productivity:
Evidence From Israeli Manufacturing Firms”
• Jennifer Hunt and Marjolaine Gauthier-Loiselle (2010) “How Much
Does Immigration Boost Innovation? “
• Moser, P., Voena, A., & Waldinger, F. (2012) “German Jewish
Emigres and US Innovation”
Impact of Immigrants on Innovation
Why Does This Issue matter?
• Hunt and Gauthier-Loiselle assess the impact of skilled immigration
on innovation measured by US patents
• Immigrants seem to play an active role in the innovative process of
a country. Example:
• 26% of US Nobel price winners from 1990 to 2000 were
immigrants.
• 25 % of founders of public venture-backed US companies from
1990 to 2005 were immigrants.
• 26% of the founders of big high tech companies in 2006 were
immigrants.
Innovation + Immigration
Hunt and Gauthier-Loiselle:
Two-Level Analyses
1) Individual-level data to study the impact of immigrants on patents
per capita under the assumption that immigrants do not influence
the behavior of natives or other immigrants, and
 Do immigrants patent more than natives because they have
higher inventive ability or merely different education or
occupations?
Hunt and Gauthier-Loiselle:
Two-Level Analyses
2) Use a panel of US states from 1940–2000, based on data from the
US Patent and to account for immigrants’ possible influence on
natives or other immigrants
• To obtain causal effect of immigrants despite endogenous choice of
destination state,
– The authors difference the data across census years, and
– instrument the change in the share of skilled immigrants in a
state’s population with the state’s predicted increase in the
share of skilled immigrants.
Data
1) Individual level analysis:
– National Survey of College Graduates (2003) for the US.(Public
acess)
– IPUMS Decennial census of micro data (US)(Public access)
2) State level analysis:
– US Patent and Trademark office
– Harvard Business School Patent Data
– IPUMS Decennial census of micro data (US)
Individual Level Data
• They estimate a Probit for the probability of having a patent
granted
• where j indexes individuals, and IM is a dummy for the foreignborn. The coefficient of interest is β1
Descriptive Statistics
Table 1 — Patenting by Immigrant Status
Descriptive Statistics
Table 3— Patenting by Field of Study
Table 4 — Effect of Immigrant Status on
Patenting
State Level Analysis
• Use a panel of US states with decennial data from 1940–2000 to
distinguish long-run and short-run effects.
• To study changes in
• where i indexes states, P is the number of patents, POP is state
population, IS is the share of the population or workforce (18–65)
composed of skilled immigrants, NS represents the corresponding share
for skilled natives, Zi,1940 are characteristics of the state in 1940, X are
characteristics, and μt are year dummies
• The coefficient of interest is γ1, though its size relative to γ2 is also of
interest.
State Level Analysis
• Because of the endogeneity problem coming from skilled workers being
likely to migrate to states which are experiencing positive shocks to
innovation, they use an enclave type instrument
• For a state i, the predicted change in the number of skilled immigrants,
caused by changing origin regions k, can be written as
• where λik is state i’s share in 1940 of the national total of immigrants who
originate from region k, and ΔMkS is the national change in the number of
skilled immigrants from that region.
�𝑠𝑠 =
• And ∆𝐼𝐼
𝑖𝑖
Table 6— Effects of Immigrant College
Graduates on Patents
What We Learned?
• Workers holding science and engineer degrees are more likely to migrate
• Immigrants patent at twice the rate of natives: analysis of the NSCG data
shows that immigrants account for 24 percent of patents, twice their
share in the population
• Patenting advantage driven by immigrants’ disproportionately holding
degrees in science and engineering fields.
• The 1.3 percentage point increase in the share of the population
composed of immigrant college graduates, and
• the 0.7 percentage point increase in the share of post-college immigrants,
 each increased patenting per capita by about 12 percent based on
least squares or 21 percent based on instrumental variables
• Immigrants do not crowd out native inventors and they have a positive
spill over effect.
Productivity Spillovers
• High skill “H1-B” (type of US visa) immigrants may raise productivity by
e.g., generating new ideas
– H1-B immigrants have high patent rates, induce more patents from
native-born: Hunt & Gauthier-Loiselle (2010), Kerr & Lincoln (2010)
• Link to productivity? HGL say may have ↑d GDP ≈2% in the 1990s
(applying est’s from Furman et al. 2002)
– Direct association between “H1-B induced” increase in science
workers and productivity across U.S. metro areas (Peri et al., 2013)
• 1990-2000: TFP ↑ 3.8%; higher college, but not non-college wages
• But Paserman (2013) finds no evidence of productivity spillovers in Israel
following the influx of former Soviet Union immigrants
– Israel too far from the technological frontier?
Gains from Variety
• Immigrants increase variety of goods and services
– More small firms (Olney, 2013), ethnic diversity in restaurants
(Mazzolari and Neumark, 2012) though perhaps more big-box retailers
– Hedonic value (Ottaviano and Peri, 2006)
• Another mechanism: scale effects increase the extent of the product
market
– Large effects from scale effects of immigration, e.g., 5% of GDP in U.S.
(di Giovanni et al., 2013)
Impact of Low Skilled Immigration
• Card, David E., "The Impact of the Mariel Boatlift on the Miami Labor
Market", Industrial and Labor Relations Review, Vol. 43 (January 1990):
245-257
• Altonji, J. G., & Card, D. (1991). The effects of immigration on the labor
market outcomes of less-skilled natives. In Immigration, trade, and the
labor market (pp. 201-234). In Immigration, Trade, and the Labor Market,
University of Chicago Press.
• Federman, Maya N., David E. Harrington and Kathy Krynski, (2006)
“Vietnamese Manicurits: Are Immigrants Displacing Natives or Finding
New Nails to Polish? Industrial and Labor Relations Review, Vol. 59
(January 2006): 302-318.
• Cortes, Patricia, and José Tessada. "Low-skilled immigration and the labor
supply of highly skilled women." American Economic Journal: Applied
Economics (2011): 88-123.
United States, 2000
50
Percent at Five Education Levels among 1990s Immigrants and Existing Workers
1990s Immigrants
Existing Workers
40
42.0
20
30
30.5
28.0
17.8
19.3
16.3
15.7
13.0
8.0
0
10
9.5
Dropout
HS Grad
Data Source: 2000 Census of Population
1-3 Yrs Coll
4 yrs Coll
Adv. Degree
United Kingdom, 2000
100
Percent College and Non-College, 1990s Immigrants and Existing Workers, 2000
1990s Immigrants
84.2
18.7
15.8
0
20
40
60
80
81.3
Existing Workers
Non-College
Data Source: Docquier, Ozden, and Peri (2010)
College
Percent College and Non-College, 1990s Immigrants and Existing Workers, 2000
College
College
100
80
40
20
0
60
40
20
0
Non-College
College
Non-College
100
0
20
40
60
80
100
60
40
0
20
40
20
College
Portugal
80
100
60
80
100
80
60
40
20
0
Data Source: Docquier, Ozden, and Peri (2010)
College
College
Belgium
Spain
0
Non-College
Non-College
80
100
60
40
0
20
40
20
0
Non-College
Italy
College
College
Netherlands
80
100
60
80
100
80
60
40
20
0
College
Greece
Non-College
Non-College
Germany
100
Non-College
France
Non-College
60
60
40
20
0
0
College
Sweden
80
80
40
20
40
20
0
Non-College
Canada
100
100
United Kingdom
60
60
80
100
United States
Non-College
College
Non-College
College
Impact of Low Skilled Immigrants on Natives’
Productivity
• Why is this interesting?
 Cortes and Tessada make the case for complementary between
immigrants and natives is in sharp contrast with papers focus on
substitutability between immigrants and natives
• Followed by others
• Farré, Lídia, Libertad González, and Francesc Ortega. "Immigration, family
responsibilities and the labor supply of skilled native women." The BE
Journal of Economic Analysis & Policy 11, no. 1 (2011).
Cortes and Tessada (2011)
• Low-skilled immigrants work is proportionately in service sectors that are
close substitutes for household production.
• Low-skilled immigrants represent
– 25 % of the workers in private household occupations and
– 12 % of the workers in laundry and dry cleaning services
– 29 % of gardeners
• Paper focuses on the impact of low-skilled immigration on female labor
supply
• The authors present a simple consumption-leisure model that also
includes a household services and a time constraint to shown that only
high wage women will likely change their time-use decisions as prices for
household services decrease
• This justify the identification strategy of comparing effects across skill
groups
Cortes and Tessada (2011)
• They test the model’s predictions using census data
• on the labor supply of high wage women, the time they devote to
household work, and their expenditures on housekeeping services
• Among their specific findings are data suggesting that the low-skilled
immigration wave of the period 1980–2000:
– Reduced by close to seven minutes a week the average time women at
the top of the wage distribution spent on household chores;
– Increased by 20 minutes a week the average time women at the top of
the wage distribution devoted to market work; and
– Increased the probability that women employed in occupations
demanding long hours would work more than 50 to 60 hours a week.
Cortes and Tessada (2011)
• Their empirical strategy exploits the cross-city variation in the
concentration of low-skilled immigrants.
• To address the potential endogeneity of the location choices of
immigrants, they instrument for low-skilled immigrant concentration using
the historical (1970) distribution of immigrants of a country to predict the
location choices of recent immigrant flows.
• There are two main concerns with the validity of our instrumental
variables strategy.
• First, cities that attracted more immigrants in 1970 might be
systematically different from other cities
• To address this concern, we include specifications that allow cities to
experience different decade shocks based on their 1970 value of key
variables, such as female educational attainment distribution, female
labor force participation, and industry composition.
Cortes and Tessada (2011)
• The second concern is that low-skilled immigration might have an impact
on the labor supply of women through other channels in particular
through interactions in market production.
• To tackle this issue, they present specifications that use men of similar skill
level as a control group, and test that the estimated relative increase in
the labor supply of women as a result of low-skilled immigration is not
driven by an increase in their wages relative to men.
Impact of Low-Skilled Immigration on Women’s
Labour Supply
Gains from Price Effects
• Cortes and Tessada (2011) find that women with high wages (and
potentially their families) are benefiting from low-skilled immigration
because of the reduction in the prices of services that are close
substitutes for household production