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Review Essays of Academic, Professional & Technical Books in the Humanities & Sciences
Migration Economics
The Economics of Migration edited
by Klaus F. Zimmermann, Thomas Bauer (The International Library of
Critical Writings in Economics Series: Edward Elgar)
In the age of globalization, the importance of migration for the industrialized
countries has increased. Inflows of migrants have steadily risen in the 1980s
and the early 1990s. Yet while the public debate about policy responses to these
developments continues unabated, research findings of economists are often
ignored. In this four-volume collection the editors have selected some of the
most significant contributions on the economics of migration, which provide an
overview of the present state of empirical migration research. Topics covered
include the migration decision, the integration of immigrants into the labor
market and society, their economic behavior, empirical and theoretical
contributions to migration policy, and the effects of immigrants on the native
population.
The history of humankind is a history of migration. Labor mobility is an
essential feature of the development of societies and also a prerequisite for
economic success. During the 1980s and the early 1990s the inflow of migrants
increased substantially in almost all OECD countries (see SOPEMI, 1999). A
remarkable feature of these increasing migration flows is that- unlike in
earlier decades - not only the traditional immigration countries (the US, Canada
and Australia) are affected, but also many European countries. Between 1988 and
1997 the share of the foreign population increased from 4.5 percent to 9.1
percent in Austria, from 7.3 percent to 9 percent in Germany, and from 5 percent
to 6 percent in Sweden (SOPEMI, 1999). Even countries that historically have
been emigration countries, such as Italy, Spain and Ireland, recently became
immigration countries.
The rapid increase in the size of the migration inflows
over the past decade has led to rising tensions in various countries. The main
issues in the policy debate were concerned with the causes of the increased
immigration flows, the (mostly missing) integration of migrants into society and
the labor market of the receiving countries, the effects of immigrants on the
welfare of the native population, and possible policy responses to avoid mass
immigration. A recent development in almost all major receiving countries has
been to identify the high potential of migrants to foster rather than to hinder
economic development. This can be linked to the increased competition for high
quality labor on the global markets for experts. The information society has
created a huge demand for additional high-skilled workers, and this will hardly
be stopped by the current weakness in the US and European economies.
Following the public debate, economic research on migration
topics has exploded in the last two decades. The articles collected here in four
volumes attempt to reflect important developments in this research. An aim is to
provide a useful point of departure for economists starting research in this
area as well as a reading list for lecturers and graduate students. Those
seeking an even broader overview on the topic are referred to some of the few
textbooks and more popular books in the field such as Simon (1989), Jasso and
Rosenzweig (1990), and Borjas (1990, 1999a). However, non-economists should also
be attracted to our collection since the articles were selected for their
relevance to the policy-oriented debate.
To choose articles from this large body of research for a
project like this turned out to be a very demanding task. Our selection process
has been guided by the following criteria: First, we have tried to identify
influential papers or milestones for the development of the economics of
migration. Due to the wide range of topics covered by research, and owing to
lack of space, it was impossible to include all of these papers. Some of this
literature was also omitted if it is nicely summarized elsewhere. For instance,
we excluded papers associated with development economics, because this research
has been covered already in the contributions of Lal and Coleman (1992) and
Stark (1991).
Second, we have searched for an adequate balance of work
related to North America, Europe and Australia. Many new influential
developments originated in the US or Canada and were followed by large numbers
of papers or books. This literature is also well documented and summarized.
However, due to important differences in the structure of immigration and the
labor market institutions, conclusions from this research are often not
applicable especially in the European context. Hence, one attempt here is to
support the research on Europe and Australia by collecting the somewhat more
scattered research for this area.
Third, while there is a huge amount of work on the
theoretical background of the migration issue, theory often gives no clear
guidance to important questions in the policy debate. To provide focus, it was
our decision to rely largely on empirical papers and literature that is, in our
view, of a more immediate value to applied questions.
As usual, many colleagues will disagree with some of our
choices for or against inclusion in this project. We are also aware that due to
space constraints we would never be able to cover all important papers on the
economics of migration. To fill the gap, we will refer in the sequel as much as
possible to existing surveys that can be used to obtain an even more complete
picture of the area. We will further provide a much more detailed bibliography
on the economics of migration on the web page
http://www.iza.org/migration. An attempt will be made to keep this
web page updated and to provide interested researchers with the possibility of
adding their work to this bibliography.
At this point we already wish to refer the reader to some
excellent collective volumes which include many path-breaking contributions in
the economics of migration and should be on the desk of every researcher
interested in this area, such as Abowd and Freeman (1991), Borjas and Freeman
(1992) and Chiswick (1992). We also recommend the collected volume by Hamermesh
and Bean (1998), which includes several articles dealing with new questions of
the effect of immigration on the native population, such as the impact of
immigration on the quality of jobs and on the educational attainment of natives.
Also worth reading is the volume by Smith and Edmonston (1998), which contains
the background paper of the report of the Panel on the Demographic and Economic
Impacts of Immigration to the US Commission on Immigrant Reform. An extensive
survey of the immigration experience and the research on immigration in Europe
is given in the volume edited by Zimmermann (2002).
The selected papers have been structured in four volumes,
each of which deals. with one particular issue, namely Volume I, The Migration
Decision and Immigration Policy, Volume II, Assimilation of Migrants, Volume
III, Quality and Behavior of Migrants, and Volume IV, Migration and the Natives.
This decision reflects the previously outlined focus on applied issues as well
as the major strands of the migration literature research: Part I (The Migration
Decision), Part II (Family Migration), Part III (Repeat and Return Migration),
Part IV (Illegal Migration), and Part V (Immigration Policy).
Part I (The Migration Decision) deals with the application
of the standard economic framework to the migration problem. Following the work
of Becker (1962), the human capital model has been introduced to migration
research by Sjaastad (Volume I, Chapter 1). This model, which treats migration
as an investment problem, probably became the most influential and widely used
approach to explain the migration decision. According to this approach,
individuals calculate the present discounted value of expected returns in every
potential region, including the home location. Migration occurs if the returns
in a potential destination region net of the discounted costs of movement are
larger than the returns achieved in the region of origin. The model has been
extended in various ways. Carrington et al. (Volume I, Chapter 7) endogenized
migration costs. Burda (1995) and Burda et al. (1998) (neither included in this
collection) introduced uncertainty about the wage differential between the home
and the receiving country and added the effect of the option value to wait for
new information as an important determinant of the migration decision.
Many empirical investigations of the determinants of
migration have been published for developed and developing countries. Surveys of
this literature are provided by Krugman and Bhagwati (1976) and Bauer and
Zimmermann (1997). Greenwood (1985) reviewed the empirical findings for
developed countries and Todaro (1980) for developing countries. The latter deals
largely with papers related to the Harris-Todaro model, which explains
rural-urban migration in the context of a less developed economy. Empirical
evidence based on aggregated data is contained in the work of Fields (Volume I,
Chapter 4), who investigates migration within the US, and Greenwood and McDowell
(Volume I, Chapter 5) who analyze migration to Canada and the US. Zimmermann
(Volume I, Chapter 6) provides an analysis of labor migration to Germany, while
Rotte et al. (Volume I, Chapter 8) investigate the causes of asylum migration
from developing countries to Germany. Finally, the contribution of Hatton and
Williamson (Volume I, Chapter 9) provides explanations for the mass emigration
from Europe in the nineteenth century. An even more complete picture of the
determinants and effects of mass migrations that took place between 1850 and
1914 is presented in the book by Hatton and Williamson (1998).
Empirical investigations using individual data to study the
determinants of migration are rather scarce. This substantial deficit of applied
research can be explained by the lack of adequate data, especially in the
context of international migration. Hence, most of the existing studies using
individual data tend to focus on internal migration. Bartel's (Volume I, Chapter
2) analysis of migration within the US serves as one example. Pissarides and
Wadsworth (Volume I, Chapter 3) investigate the interaction between unemployment
and mobility within the UK.
The work summarized in Part I of Volume I treats migration
as a problem of individual decision-making. Another approach challenged many of
the conclusions of this research by postulating that the migration decision is
typically made by families or households rather than by individuals. This
research is represented by papers in Part II (Family Migration). A first attempt
to consider migration as the outcome of household decision-making has been made
by Sandell (Volume I, Chapter 10) and Mincer (Volume I, (~h"pter 11). According
to their approach a family will only migrate if the gains of one family member
internalize the losses of other family members. Different to Sandell and Mincer,
Borjas and Bronars (Volume I, Chapter 12) investigate the role of the family in
the determination of the skill composition of immigrants to the US.
Several alternative concepts of modeling migration were
developed. Many of them are included in the excellent survey by Stark (1991).
Since this book is a collection of the important pieces of the literature that
was called the "new economics of migration", single articles were not included
here. One approach models migration as a risk-sharing behavior of families. In
contrast to individuals, households are able to diversify their resources such
as labor in order to minimize risks to the family income. This goal can be
reached by sending some family members to work in foreign labor markets where
wages and employment conditions are negatively or weakly correlated with those
in the local region. Another approach in this literature develops from the
assumption that families evaluate their income not only in absolute terms but
also relative to other households. In the relative deprivation approach,
migration occurs in order to improve the income of the household relative to a
reference household.
Part III (Repeat and Return Migration) deals with the
temporary nature of many migration flows. The theoretical literature treats
return migration as part of life-cycle planning where return migration is an
optimal decision-making phenomenon. In most existing models, return migration of
individuals results from the assumption that the marginal utility of consumption
is higher in the home country than in the receiving country (see Hill, Volume I,
Chapter 14, Djajic and Milbourne, Volume I, Chapter 15, and Dustmann, Volume I,
Chapter 17). Alternative motives for return migration, which are not included in
this volume, are developed by Dustmann (1995) who assumes that relatively high
returns to human capital investments made in the receiving country are
responsible for return migration, and by Stark (1995), who models return
migration as the result of employer learning about the skills of temporary
migrants. Empirical evidence on the determinants and the structure of temporary
migration is rather scarce. DaVanzo (Volume I, Chapter 13) investigates repeat
and return migration within the US. An empirical analysis of the determinants
and the structure of emigration of foreignborn in the US is provided by Borjas
and Bratsberg (Volume I, Chapter 16).
Illegal migration (Part IV) has always been at the center
of the policy debate in North America, but it also became increasingly important
in Europe, especially for the South European countries (see also the special
issue on illegal migration in the Journal of Population Economics edited by
Katseli et al., 1999). Illegal migrants break laws and rules. They challenge the
public transfer system since they pay no taxes and social security
contributions, but they use public goods or publicly subsidized services, and
they compete with natives and legal immigrants on the labor market. Apart from
the heated public debate, illegal migration has only recently been captured by
economic research.
A first rigorous treatment of the economic consequences of
illegal migration is provided by Ethier (Volume I, Chapter 18), who investigates
the implications of alternative policies towards illegal immigrants for the
level of welfare and the income distribution in the host country. Djajic (Volume
I, Chapter 20) gives a theoretical analysis of the effects of illegal migration
on resource allocation, commodity prices, and wages of workers with different
skills. He explicitly studies both the short-run effects when occupational
mobility is restricted, and the long-run effects when the skill composition of
the native workforce reacts to illegal migration. Building on the Harris-Todaro
model (see Todaro, 1969, and Harris and Todaro, 1970), Todaro and Maruszko
(Volume I, Chapter 19) provide an analytical framework of an individual's
decision to migrate illegally when legal migration is possible.
Chiswick (Volume I, Chapter 21) provides a detailed
economic discussion of the efficiency of the US Immigration Reform and Control
Act (IRCA) of 1986, which granted legal status or amnesty to certain illegal
immigrants and introduced penalties against employers who hire illegal
immigrants. Hill and Pearce (Volume I, Chapter 22) use a general equilibrium
incidence analysis to assess the long-run effects of the sanctions against
employers hiring illegal immigrants on resource allocation and income
distribution in the US. Another feature of the IRCA was an increased budget for
apprehending undocumented migrants. Using Mexican data, Kossoudji (Volume I,
Chapter 23) investigates whether border control and apprehension activity lead
to changes in the migration behavior. Her results indicate that the main effects
of this policy were that migrants stay in the US longer while they stay in
Mexico for shorter spells between trips to compensate for the costs of increased
apprehension. Cobb-Clark et al. (Volume I, Chapter 24) investigate the effects
of IRCA on the wages of production workers in manufacturing. They find that
sanctions against employers hiring undocumented migrants have a negative effect
on wages whereas the amnesty of illegal workers affected wages positively. Both
effects however, are very small.
Part V (Immigration Policy) collects papers that deal with
direct policy concerns. The contribution of Simon (Volume I, Chapter 25)
originated in the US context. It summarizes the major options for an explicit
immigration country to choose economic migrants properly. The European context
has been quite different, which has been well reflected by the slogan of a
"Fortress Europe". Straubhaar and Zimmermann (Volume I, Chapter 26) argue that
the stagnating and aging West European populations, the prosperous economic
development of the European Union member countries, and the drastic political
changes in Eastern Europe call for a substantial reform of immigration policies
to open up the European labor markets. The paper proposes an active European
migration policy. It is typically conjectured that immigrants would be harmful
to the European economies in the face of high unemployment rates in the member
states. The paper by Zimmermann (Volume I, Chapter 27) argues that a selective
immigration policy is called for to cope with this issue. European unemployment
is to a large extent a problem of unskilled labor. However, high-skilled labor
migrants are needed and can contribute to creating jobs for low-skilled natives.
So far, the literature on the economics of migration policy has been rather
scarce. An exception is the paper by Benhabib (Volume I, Chapter 28). It studies
how immigration policies that impose skill and capital requirements would be
determined under majority voting when natives vote to maximize their income.
Volume II: Assimilation of Migrants
This volume investigates the way in which migrants
assimilate to the destination country. Part I (Immigrants' Labor Market
Assimilation: Evidence from North America) collects evidence from North America,
Part II (Immigrants' Labor Market Assimilation: Evidence from Europe and
Australasia) deals with Europe and Australasia. Part III is Migration and
Self-Selection, Part IV The Role of Language. The book by Zimmermann (2002)
contains a recent summary of the European experience.
Part I (Immigrants' Labor Market Assimilation: Evidence
from North America) documents the origin and major steps of this debate.
Following the pioneering work of Chiswick (Volume II, Chapter 1), the analysis
of the earnings assimilation of immigrants towards those of natives has become
one of the predominant topics in the economics of migration. Borjas (1994,
1999b) gives a survey of this literature. In his seminal article, Chiswick
estimated a standard wage equation with a dummy variable indicating whether an
individual is an immigrant and the number of years of residence of an immigrant
worker in the US as additional explanatory variables using the 1970
cross-section of the US census. The estimation results by Chiswick indicate that
at the time of entry to the US labor market an immigrant has an earnings
disadvantage compared to a similar native worker. With time of residence the
earnings of immigrants converge to those of natives and after about 15 years of
residence the earnings of immigrants even exceed those of natives. Chiswick
explains the initial earnings disadvantage with imperfect transferability of
human capital across countries. As immigrants acquire the skills that are
important in the US labor market, the human capital stock of immigrants grows
faster than that of natives, which explains the convergence of earnings. Duleep
and Regets (Volume II, Chapter 6) provide a theoretical model explaining why
immigrants invest more in human capital than natives, and how human capital
investments vary by type of immigrant. Chiswick's results, which showed that
immigrants earn more than similar natives after about 15 years in the US, are
explained with a favorable self-selection of immigrants in terms of unobservable
characteristics such as ability and motivation.
The paper by Borjas (Volume II, Chapter 2) questions
Chiswick's findings, arguing that his results are spurious because of cohort
effects. When using cross-section data to estimate earnings assimilation of
immigrants, a positive correlation between years since migration and earnings
might evolve if the quality of immigrants decreases over time. Using the 1970
and 1980 US census, Borjas shows that for most immigrant groups within-cohort
earnings growth is significantly smaller than the earnings growth predicted by
cross-section regressions, indicating that there has been a decrease in the
quality of immigrants to the US.
The contribution of Borjas initiated an intense debate on
the measurement of earnings assimilation of immigrants. In addition to the
problem of biased results on the estimated coefficient on years since
immigration in a wage regression, researchers investigated the sensitivity of
empirical results of immigrants' earnings assimilation with respect to the
choice of the comparison group (see Yuengert, Volume II, Chapter 3) as well as
the importance of period effects, which in most empirical studies are assumed to
affect natives and immigrants in a similar way (see for example the article by
LaLonde and Topel (1992), which is not included in this collection).
The debate on earnings assimilation of immigrants in the US
also started a rich literature on assimilation of immigrants in other important
immigration countries (Part II: Immigrants' Labor Market Assimilation: Evidence
from Europe and Australasia), such as Canada (see Baker and Benjamin, Volume II,
Chapter 4, and Bloom, Grenier and Gunderson, Volume II, Chapter 5), Australia
(Chiswick and Miller, Volume II, Chapter 9), New Zealand (Winkelmann and
Winkelmann, Volume II, Chapter 14), Germany (Dustmann, Volume II, Chapter 11,
and Schmidt, Volume II, Chapter 13), Sweden (Aguilar and Gustafsson, Volume II,
Chapter 10), France (Granier and Marciano, Volume II, Chapter 7), and the UK
(Chiswick, Volume II, Chapter 8, and Bell, Volume II, Chapter 12).
The conclusion by Borjas (Volume II, Chapter 2) that the
quality of migrants to the US declined over time created another discussion
within the migration literature, which is concerned with the development and the
determinants of the quality of migrants in terms of the stock of human capital
they bring with them and the transferability of this human capital stock to the
labor market of the host country. A sample of papers within this strand of
literature is provided in Volume III of this collection.
One explanation of the decreasing quality, however, rests
on the presumption that migrants are a self-selected group. Hence, several
studies have investigated this hypothesis. Part III (Migration and
Self-Selection) documents this literature. Borjas (Volume II, Chapter 17) uses a
version of the well-known Roy model to show that both the mean and the variance
of labor market opportunities in the home and the host country determine the
incentives for individuals to migrate. Cobb-Clark (Volume II, Chapter 18)
extends this analysis of migrant selectivity to female immigrants. Changes in
the labor market opportunities in the sending and receiving countries lead to a
change in the structure and hence the quality of immigrants. Even before Borjas
used the Roy model to explain self-selection of international migrants, this
approach had been applied to explain internal migration. Nakosteen and Zimmer
(Volume II, Chapter 15) made the first attempt to incorporate endogenous
selectivity into a model of migration and income using data for the US, and
Robinson and Tomes (Volume II, Chapter 16) used the Roy model to compare the
wages of migrants within Canada to the wages of stayers.
The assimilation pattern of immigrants' earnings to those
of natives has been explained by the differential accumulation of human capital
by immigrants and natives. An important factor identified by the literature is
the ability of migrants to speak and write the dominant language of the host
country. Papers investigating this issue are collected in Part IV (The Role of
Language). In an early investigation for Canada, Carliner (Volume II, Chapter
19) shows that individuals whose native language was neither French nor English
earned significantly lower wages than monolingual or bilingual English or French
workers. McManus, Gould and Welch (Volume II, Chapter 20) and Grenier (Volume
II, Chapter 21) conclude that immigrants in the US who are proficient in English
earn significantly more than non-proficient immigrants. Chiswick (Volume II,
Chapter 22) investigates the determinants of language proficiency among
immigrants. His results indicate that English speaking and reading fluency
increases with years of residence in the US. This increase in language
competence is higher for those with more schooling. Estimating earnings
regressions, he further shows that English reading fluency is more important for
the labor market success of immigrants than speaking fluency. Chiswick's results
are supported by the findings of Dustmann (Volume II, Chapter 23), who shows
that writing proficiency is more important for the earnings position of
immigrants in Germany than speaking fluency.
Empirical investigations of the effect of language ability
on earnings suffer from a potential endogeneity bias since immigrants who expect
higher earnings when they are fluent in the host country's language are also
more likely to become fluent. Chiswick and Miller (Volume II, Chapter 24) have
dealt with this criticism. They confirm for Australia, Canada, Israel and the US
the presumption that language proficiency is indeed endogenous. Most studies on
the determinants of language proficiency among immigrants find duration of
residence in the host country to be one of the most important determinants. In
addition, a common result of these studies is that immigrants who live in
regions that have a relatively high representation of individuals speaking the
language of their home country are less likely to become fluent in the dominant
language. Chiswick and Miller (Volume II, Chapter 25) show that this effect is
mainly due to formal ethnic networks, i.e. that measures of minority language
concentration mainly capture interactions in the marriage market, with family
and with ethnic media.
Volume III: Quality and Behavior of Migrants
There have been substantial concerns about the development
of immigrant quality upon arrival and the economic behavior of immigrants.
Volume III provides a structure to this debate by collecting articles in the
various areas: Part I (Immigration Policy and Immigrant Quality), Part II (Labor
Supply), Part III (Self-Employment), Part IV (Welfare Benefits) and Part V
(Intergenerational Issues).
According to the literature on the economic assimilation of
migrants, an important determinant of economic success of migrants - and hence
the costs associated with immigration - is the skill level of the migrant as
well as the transferability of these skills to the new environment. Furthermore,
changes in the skill levels of immigrants may alter the effect of immigration on
the income level and the income distribution among natives. Part I (Immigration
Policy and Immigrant Quality) addresses this issue. The article by Douglas
(Volume III, Chapter 1) shows that the quality of immigrants was a main issue of
the migration debate even early in the last century. A crucial issue of the
debate on the quality of immigrants is the effectiveness of different
immigration policies in selecting high-quality immigrants. As part of the debate
on the earnings assimilation of immigrants (see Volume II), the debate on the
quality of immigrants was revived. Using the 1980 US Census, Chiswick (Volume
III, Chapter 2) analyzes the changes in the quality of migrants who entered the
US between 1950 and 1980. His work leads to the conclusion that the rationing of
immigration visas by skills tended to increase the average skill level of
immigrants, whereas the growing number of immigrants admitted through kinship
and the increasing number of illegal immigrants and immigrants from less
developed countries lead to a lower average skill level.
Borjas (Volume III, Chapter 3) shows that changes in the US
immigration policy in 1965 led to major changes in the country-of-origin mix of
the immigration flows. The change in the origin of immigrants can explain the
recent decline in skills and relative wages of successive immigration cohorts.
Borjas (Volume III, Chapter 3) concludes that over 90 percent of this decline
can be explained with changes in the source-country mix. Based on CPS data,
Funkhauser and Trejo (Volume III, Chapter 6) conclude that immigrants who
entered the US in the late 1980s are more skilled than those who entered
earlier, which means that there is a break in the steady decline of immigrant
skills between 1940 and 1980.
Jasso and Rosenzweig (Volume III, Chapter 5), Barrett
(Volume III, Chapter 8) and Duleep and Regets (Volume III, Chapter 9) compared
immigrants in the US who migrated under different admission criteria. Using
longitudinal data on the 1977 US arriving cohort, Jasso and Rosenzweig (Volume
III, Chapter 5) show that at the time of immigration those migrants admitted on
skill-based reasons are more skilled than those admitted under family
reunification. Evidence is found that those admitted on skill-based reasons
experience downward mobility and those admitted because of family reasons face
upward mobility. Hence, the difference between the two groups of migrants
becomes significantly smaller with the time of residence in the US. Duleep and
Regets (Volume III, Chapter 9) confirm the results of Jasso and Rosenzweig
(Volume III, Chapter 5). Using a matched Immigration and Naturalization Service
(INS)-Social Security Administration (SSA) data set, Duleep and Regets (Volume
III, Chapter 9) find that immigrants admitted on the basis of kinship into the
US earn substantially less at the time of immigration than immigrants admitted
primarily on the basis of their occupational skills. The former, however,
experience a faster wage growth with time in the US than migrants
finds that more than 50 percent of the native/immigrant
self-employment rate gap is due to the fact that immigrant groups generally have
higher home country self-employment rates than the US. Fairlie and Meyer (Volume
III, Chapter 15) find that high relative returns to selfemployment, the level
of education, and years of residence are important determinants of
selfemployment. They cannot support the hypothesis that immigrants from
countries with high self-employment rates also have a higher probability of
becoming self-employed in the US.
Another important question in the immigration debate is
whether immigrants pay their way in the welfare state. Part IV (Welfare
Benefits) studies this issue. Existing research on the welfare dependence of
immigrants focuses again on the assimilation of migrants in the host country and
the development of immigrants' welfare participation behavior with time of
residence (see Blau, Volume III, Chapter 16, Simon, Volume III, Chapter 17,
Borjas and Hilton, Volume III, Chapter 20). The empirical results on welfare
dependency further suggest that immigration policy plays a role: whereas
immigrants are initially less likely to depend on welfare in Canada (see Baker
and Benjamin, Volume III, Chapter 19), the dependency rates of immigrants in the
US exceed those of natives (see Borjas and Trejo, Volume III, Chapter 18).
In contrast to the extensive literature on assimilation of
first-generation immigrants, relatively little is known about the labor market
performance of their children and grandchildren born in the host country. A
selection of relevant articles is contained in Part V (Intergenerational
Issues). Chiswick's (Volume III, Chapter 21) results indicate that, if anything,
second generation immigrants have a slight earnings advantage over individuals
with native-born parents. A positive relationship between the earnings of first
and second-generation immigrants is found by Borjas (Volume III, Chapter 22). He
further finds that the earnings of second-generation immigrants in the US are
significantly affected by the economic conditions in the source countries of
their parents. Gang and Zimmermann (Volume III, Chapter 23) show for
secondgeneration immigrants in Germany that ethnic differences in educational
attainment persist even after controlling for household and individual
characteristics, and that parental education has no independent effect on the
educational outcome for children in immigrant households but does have an effect
for those in native households.
Volume IV: Migration and the Natives
One of the most important and most sensitive debates in the
migration literature deals with the effects of immigrants on the native
population (see Greenwood and McDowell, 1986, 1994, Borjas, 1994, and Friedberg
and Hunt, 1995, for surveys of the literature). The book by Zimmermann (2002)
contains a recent summary of the European experience. We have allocated the
relevant literature in the following four parts: Part I (The Effect of
Immigrants on Natives: Theory), Part II (Labor Market Impact of Immigration:
Evidence from North America), Part III (Labor Market Impact of Immigration:
Evidence from Europe and Australasia), and Part IV (Migrants and Mobility of the
Natives).
Different to the question of immigrant assimilation, which
is to a large extent empirical, a growing theoretical literature analyzes the
economic effects of migration on natives. Theoretical predictions of the
economic effects of immigration depend on the specific assumptions of the model
used. The most critical assumptions in this setting are the openness of sending
and receiving countries to international trade, the technological relationship
between immigrants
and natives, and whether one considers a perfect or an
imperfect labor market in the host country. Part I (The Effect of Immigrants on
Natives: Theory) presents a selection of relevant articles.
An early contribution is Reder (Volume IV, Chapter 1), who
discusses the consequences of immigration on the economy of the host country in
a standard neoclassical framework, where immigrants and natives are perfect
substitutes. Berry and Soligo (Volume IV, Chapter 2) study the effect of
emigration on the remaining population using a one-sector neoclassical growth
model with two types of labor: unskilled and skilled workers. They show that if
the two types of labor have a different savings behavior, and if migrants take
their capital with them, then emigration leads to a decreased utility of the
remaining population. Rodriguez (Volume IV, Chapter 3) finds that some of the
conclusions of Berry and Soligo change when the savings behavior is modeled
similar to the Samuelson-Diamond life cycle model of savings instead of being
treated as exogenous. Usher (Volume IV, Chapter 4) extends the standard analysis
of the economic effects of migration on the sending and receiving countries by
taking into account the use of public goods by migrants. Johnson (Volume IV,
Chapter 5) considers the impact of unskilled immigration on wages and employment
among the native population of the host country explicitly allowing for the
possibility of rigid wages for low-skilled workers. Ethier (Volume IV, Chapter
6) introduces international labor mobility of two types of labor into a standard
factor-endowment model of international trade. Schmidt, Stilz and Zimmermann
(Volume IV, Chapter 7) show that unskilled immigration may be beneficial even if
there is an imperfectly competitive labor market with persistent unemployment
among native unskilled workers. The contributions by Borjas (Volume IV, Chapter
8) and Bauer and Zimmermann (Volume IV, Chapter 9) provide simulation studies to
quantify the potential labor market effects of immigration.
Several approaches have been used to estimate the impact of
immigration on the labor market outcomes of natives. Part II (Labor Market
Impact of Immigration: Evidence from North America) and Part III (Labor Market
Impact of Immigration: Evidence from Europe and Australasia) contain research
findings on the labor market impacts of immigration on natives. Various studies,
such as Grossmann (Volume IV, Chapter 10) and Gang and Rivera-Batiz (Volume IV,
Chapter 16), used a production function approach to calculate the elasticity of
substitution between immigrants and natives. Most existing studies, however,
look at the labor market effects of immigration on natives by estimating a
reduced form wage equation, where the share of immigrants in a region or an
industry is the explanatory variable of main interest. An analytical derivation
of such a reduced form equation is given by Altonji and Card (Volume IV, Chapter
12). Using the reduced form estimation, Altonji and Card provide evidence on the
wage effects of immigration to the US, De New and Zimmermann (Volume IV, Chapter
17) focus on Germany, and Winter-Ebmer and Zweimuller (Volume IV, Chapter 19)
study Austria. Some studies analyze the employment effects of immigration by
using the employment growth or the unemployment rate of natives as a dependent
variable; see Winkelmann and Zimmermann (Volume IV, Chapter 15), Pischke and
Veiling (Volume IV, Chapter 20), Winter-Ebmer and Zweimuller (Volume IV, Chapter
21) and Shan, Morris and Sun (Volume IV, Chapter 22). Finally, Borjas, Freeman
and Katz (Volume IV, Chapter 13) consider the effects of immigration and trade
on wage inequality.
Several problems are inherent in studies on the effects of
immigration on wages and employment of natives. First, the share of immigrants
in a region or industry is likely to be
endogenous, since immigrants may choose the location or
industry in the host country where high wages can be achieved. To circumvent
this problem, most authors rely on instrumental variable estimations. Another
approach to avoid biases in the analysis of the wage and employment effects of
immigration is to analyze "natural experiments" in immigration, where the timing
and the location of immigration is not economically motivated. Examples of such
studies are Card (Volume IV, Chapter 11), who investigates the migration of
Cubans to Miami around the May 1980 Mariel boatlift, Hunt (Volume IV, Chapter
14), who looks at the repatriation of French residents of Algeria to France
resulting from Algerian independence in 1962, and Carrington and de Lima (Volume
IV, Chapter 18) who investigate the return of colonialists from Africa to
Portugal after a revolution in 1974.
Overall, the empirical results of all these studies suggest
that there is, if anything, only a negligible effect of immigration on the wages
and employment of natives. However, it might be the case that the measured
effects are biased downwards if increased immigration into an area results in an
increased outflow of natives from this area. The issue is studied in Part IV
(Migrants and Mobility of the Natives). The empirical evidence on the migration
response of natives to an increased inflow of migrants is mixed. Whereas Frey
(Volume IV, Chapter 24) and Filer (1992 - not included in this volume) find a
positive link between an increased inflow of migrants and the outflow of
natives, this conclusion was not confirmed by Butcher and Card (Volume IV,
Chapter 23), Wright, Ellis and Reibel (Volume IV, Chapter 25) and White and
Liang (Volume IV, Chapter 26).
Some Final Remarks
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