Presentation on theme: "The Benefits of Immigration: Some Implications of Recent Findings Ethan Lewis Dartmouth College."— Presentation transcript:
The Benefits of Immigration: Some Implications of Recent Findings Ethan Lewis Dartmouth College
The Standard Model Gains to immigrants themselves are huge – Large cross-country income differences persist – The world would benefit from a much freer immigration system (e.g., Hamilton and Whalley 1984, Kennan 2013) Gains to receiving country are comparatively small, and contingent on much larger distributional impacts (e.g., Borjas, 1999) – Typical estimate of net benefit: Well <1% of GDP.
The Standard Model Immigration produces benefits by tilting the wage structure: – A country gains the most from immigration when it admits immigrants with scarce skills: those skills which are rarest in the existing population – This lowers the wage of those scarce skill, but raises the wage of everyone else (the commoner skill) and on average natives benefit There are winners and losers – A skill-balanced inflow produces no long-run benefits Perhaps a (very) short run benefit for native capital owners
The standard model: whats missing? Factors which make benefits larger: Imperfect substitutability between immigrants and natives in the same observable skill group Imperfect substitutability – s natives gains from immigration: adverse distributional consequences are borne more by immigrants themselves – Related: gains from product variety Productivity spillovers Factors which (generally) make benefits smaller: Long-run adjustments in production technology Non-wage impacts: public goods, compositional amenities
Gains from Variety Immigrants increase variety of goods & svcs – 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)
Spillovers, but… But Paserman (2013) finds no evidence of productivity spillovers in Israel following the influx of former Soviet Union immigrants – He looks across industries and firms Some evidence that high-tech sectors benefitted Misses aggregate effects?aggregate effects – Israel too far from the technological frontier?
Other factors not in standard model Entrepreneurship: immigrants have high rates Entrepreneurship – May also have productivity benefits Long run adjustments in production techn. Long run Public goods
Conclusions Standard model: immigration has benefits, but come with larger distributional consequences – Benefits largest from immigrants with skill that are scarce in the native population (low-skill in US) Standard model leaves out many things, some of which may dwarf benefits in stand. model – Although more research supporting this claim would be helpful
Imperfect Substitutability Imms & natives are imperfect substitutes = wage gap between them responds to their relative #s* – In U.S. appears tied to English language skills:language skills Immigrants w/strong English much closer substitutes for natives (Lewis, 2011) – Immigrants and natives specialize in different jobs Natives specialize in jobs which require communication (Peri & Sparber, 2009) …and benefit from lower cost of low-skill svcs (Cortes, 2008) – This increases natives net gains from immigration, as adverse distributional consequences are borne more by the immigrants themselves * e.g., Ottaviano and Peri, 2012. Back
Back to whats missingBackBack to language skills
Aggregate Trends in Israel, Before and after FSU Immigration
Entrepreneurial ability – or willingness to take risks – may be another scarce skill that immigrants bring, with productivity benefits – Imms more likely to start businesses (eg, Hunt 2011) Hunt studied college educated imms, but imms have high entrepreneurship rates at all education levels – Raises productivity? Immigrant-owned businesses have 12% more revenue/worker than native-owned businesses (Garcia-Perez, 2008)revenue/worker Also, business turnover accounts for a large fraction of productivity growth (e.g., Haltiwanger 2009)
The Long Run In the long-run, adjustments in production tech may diminish adverse distributional impacts of immigration (Lewis, 2013) – In response to unskilled imm, shift to (Beaudry & Green 2003, 2005) or develop (Acemoglu 1998, 2002) more unskilled production technology Other mechanisms: capital adjustments under capital- skill complementarity; adjustments in product mix – Also implies that benefits will diminish over time back
Public goods Likely animates much of the opposition to immigration, rather than labor market impacts – Natives reveal a strong distaste for living in neighborhoods (Saez & Wachter, 2011), sending children to school w/imms (Cascio & Lewis, 2012) – Also, some benefits (social security solvency) – Needs more research Natives may have an exaggeratedly negative view of immigrants impact on public goods back
Sources Cited Many of the ideas in this article derive from Lewis E. 2013. Immigration and Production Technology. Annual Review of Economics 5. The standard model is well described in: Borjas, GJ. 1999. The Economic Analysis of Immigration. In Handbook of Labor Economics Volume 3A, ed. O. Ashenfelter and D. Card, pp. 1697-1760. Amsterdam: Elsevier. Other sources include: Acemoglu D. 1998. Why do new technologies complement skills? Directed technical change and wage inequality. Q. J. Econ. 113:1055–89 Acemoglu D. 2002. Technical change, inequality and the labor market. J. Econ. Lit. 40:7–72 Acemoglu D, Angrist J. 2000. How large are human capital externalities? Evidence from compulsory schooling laws. In NBER Macroeconomics Annual, ed. BS Bernanke, K Rogoff, pp. 9–74. Cambridge, MA: MIT Press Beaudry P, Green DA. 2003. Wages and employment in the United States and Germany: What explains the differences? Am. Econ. Rev. 93:573–602 Beaudry P, Green DA. 2005. Changes in U.S. wages, 1976–2000: ongoing skill bias or major technological change? J. Labor Econ. 23:609–48 Cascio, EU and Lewis, EG. 2012. Cracks In the Melting Pot: Immigration, School Choice, and Segregation. Am. Econ J. Econ. Pol. 4: 91-117
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