The Impact of Immigration on Wages, Internal Migration and Welfare

 

From Suphanit Piyapromdee:

Over the past few decades, the number of immigrants entering the U.S. has increased substantially. The local impacts of immigration may differ from national impacts since some cities attract more immigrants. Even within a city, workers may be affected differently depending on the substitutability of their labor with that of the new arrivals as well as their abilities to move. This paper studies the impact of immigration on wages, internal migration and welfare. I develop and estimate an equilibrium model where labor differs by skill level, gender, experience and nativity. Workers are also heterogeneous in city preferences and place attachments. Cities vary in productivity levels, housing prices and local amenities. The results indicate that a 30 percent increase in the stock of immigrants has a small impact on the wages and welfare of natives. If workers are constrained to remain in their original locations, the initial wage impacts on previous immigrants are negative and much more severe in the popular destina- tions for new immigrants. When workers migrate in response to the immigration, the negative wage and welfare impacts in most locations are diffused. However, the negative impacts on the wages of low skill workers in some locations intensify. This is because low skill workers have stronger attachments to places, and hence are less mobile relative to high skill workers. The extent to which the migration responses reduce the adverse wage impacts depends on a city’s labor composition. The model is also used to assess changes in the skill mix of immigrants and a location-specific immigration policy.

The Impact of Immigration on Wages, Internal Migration and Welfare
ozidar
Sat, 07 Dec 2013 20:35:47 GMT

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What we need for economic recovery

 

Consider three leading explanations for the current weak economic conditions. First, a new paper from James Stock and Mark Watson identifies demographic shifts as an important determinant of poor current economic conditions, and a likely problem going forward:

…barring a new increase in female labor force participation or a significant increase in the growth rate of the population, these demographic factors point towards a further decline in trend growth of employment and hours in the coming decades. Applying this demographic view to recessions and recoveries suggests that the future recessions with historically typical cyclical behavior will have steeper declines and slower recoveries in output and employment.

Second, as Karl has argued, the economy is waiting for “the kick” of an increase in sales of durables like housing and autos. Third, you have low house prices in holding back the economy by weakening household balance sheets.

My question is this: do not all of these factors point towards more immigration to drive both a recovery now and a recovery from the decline in the long term economic trends? In The Great Stagnation, Tyler Cowen identified lots of immigration as one of the three main kinds of low hanging fruit that helped drive our earlier growth:

“In a figurative sense, the American economy has enjoyed lots of low-hanging fruit since at least the seventeenth century, whether it be free land, lots of immigrant labor, or powerful new technologies. Yet during the last forty years, that low-hanging fruit started disappearing, and we started pretending it was still there.”

But this low hanging fruit has not gone away. We have simply stopped grabbing it.

Filed under: Uncategorized

What we need for economic recovery
Adam Ozimek
Fri, 30 Mar 2012 12:23:00 GMT

Ayn Rand an Illegal Immigrant

Date: Tue, Feb 14, 2012 at 8:27 PM

Earlier this month was the birthday of Ayn Rand, the controversial philosopher and novelist, who emigrated from the Soviet Union in 1926. Regardless of what one thinks of her ideas, there is no denying that she was a great American. When the American intelligentsia was playing footsie with Soviet communism, Rand unabashedly defended liberty and individual rights, America’s core values, famously declaring: “[The] United States of America is the greatest, the noblest and, in its original founding principles, the only moral country in the history of the world.”

But this proud naturalized American, who arguably did more than any contemporary figure to restore the faith of Americans in America, might have been hounded out of the country if one of our current crop of Republican hopefuls had been president when she arrived. Why? Because Rand lied and bent every rule to gain entry into the United States.

http://reason.com/archives/2012/02/14/ayn-rand-was-an-illegal-immigrant

America, the Underpopulated?

Two posts I’ve seen relate to the idea of if the US is underpopulated and disadvantaged by that.  The most readable follows, another here is also interesting.   The second post suggests that economic activity will necessaily gravitate to where people are, and that in Asia, not the North Atlantic.  Europe and North America only are as big a share of wealth and income as they are through historical accident of making some innovations first, but over time activity will tend to gravitate back to Asia the center of population.  None of this mean we’ll be pooerer, but they will be richer relative to us.   Finally immigration is a plus not a negative our economy.

(Comstock)

A recent editorial in The New York Sun argues that all this political bickering about immigration among Republican candidates misses an important truth: America is actually underpopulated. From the article:

[N]ot a single Republican candidate has spoken up for the idea that America is an underpopulated country. In terms of population density, it is, at 83 persons a square mile, an impoverished country, barely a quarter of the rich density of China, which is running way behind India. America just has enormous room for population growth.

And a desperate need.

What do you think, readers?  Is America under-populated? Would Montana and Wyoming, for example, benefit from a few more people?

(HT: Paul Kedrosky)

America, the Underpopulated?
Freakonomics
Fri, 21 Oct 2011 14:08:34 GMT

Core and Periphery

But the problem is especially acute for America, and here’s why. Let’s think about Cores and Peripheries. Take a look at this population density map of the world:

Suppose all of those people had the same purchasing power. If you were a factory owner, and you wanted to minimize transport costs, where would you put your factories? The answer is a no-brainer: China and India. Some others in Europe, Japan, and Indonesia. Perhaps a couple on the U.S. East Coast. But for the most part, you’d laugh in the face of any consultant who told you to put a factory in the U.S. The place looks like one giant farm!

It may be that American manufacturing strength was due to a historical accident. Here is the story I’m thinking of. First, in the late 19th and early 20th centuries, our proximity to Europe – at that time the only agglomerated Core in the world – allowed us to serve as a low-cost manufacturing base. Then, after World War 2, the U.S. was the only rich capitalist economy not in ruins, so we became the new Core. But as Europe and Japan recovered, our lack of population density made our manufacturing dominance short-lived.

Now, with China finally free of its communist constraints, economic activity is reverting to where it ought to be. More and more, you hear about companies relocating to China not for the cheap labor, but because of the huge domestic market. This is exactly the New Economic Geography in action.

Sustain Points and the Great Recession

Actually, the story could be even worse for us. There is another interesting feature of the New Economic Geography theory: hysteresis. I.e., history matters. A place that becomes a city will not easily turn back into a farm. There is a "sustain point" in the economic forces that make an agglomeration viable, and as long as a Core region stays above that point, its initial good luck in becoming the Core will keep it safe from turning back into a backwater.

BUT, a severe shock can knock you down below the sustain point. If your Core no longer has a good reason to be the Core – if it remained rich and built-up only because it would have cost too much to move it – then a big recession (or a devastating war, or a natural disaster) will cause economic activity to leave permanently. Think about the permanent shrinkage of New Orleans in the wake of Katrina.

In this light, the Great Recession of 2008-whenever might be a lot more ominous than even the Great Depression. What if this gargantuan shock has finally made it worthwhile for the center of world industrial activity to relocate to the North China Plain, where nature says it ought to reside?

Great Stagnation…or Great Relocation?
Noah
Sun, 18 Sep 2011 21:39:00 GMT

When They Take Over, We'll Be Them

 

(October 12, 2011 12:34 AM, by Bryan Caplan) True story: A Jewish senior complained to me, "There are hardly any regular Caucasians left."  I couldn’t resist pointing out that when he was a kid, Jews weren’t "regular Caucasians."  Everyone – Jews and Gentiles alike – saw the Jews… (0 COMMENTS)

When They Take Over, We’ll Be Them
Bryan Caplan
Wed, 12 Oct 2011 07:34:29 GMT

A Lump of Cruelty

Modeled Behavior

via A Lump of Cruelty.

Alabama law now makes it a crime for an illegal immigrant to solicit work and makes it legal to detain people indefinitely on suspicion of being an illegal immigrant.

The law allows police to detain people indefinitely if they are suspected of being in the country illegally and requires schools to check the status of new students when they enroll. Those elements make it perhaps the toughest law in nation.

The law targets employers by forbidding drivers from stopping along a road to hire temporary workers. It also bars businesses from taking tax deductions for wages paid to illegal workers and makes it a crime for an illegal immigrant to solicit work. A federal judge has temporarily blocked those sections of the law so she can study them more.

So any pretext of being concerned about folks coming here to be a burden on the system is completely abandoned. It is now extra illegal to even try to work and feed your family

Gary Becker’s Immigration Plan

It seems to me that immigration unquestionably produces more gains than losses.  However the gains may go largely to the immigrants.  This is certainly what many people believe, and thus oppose immigration.  So what to do?  How about this:

Gary Becker thinks we should let almost any immigrant in, and charge them $50,000. Those who can’t pay the costs up front would be offered a student-style loan, which they would have to pay back. He also suggests that the government could set a quota each year and auction off the rights to immigrate here. Becker argues that the welfare state would prevent us from moving to a system of completely free entry. He also points out that a disproportionate number of U.S. immigrants come here for family reunification rather than work reasons when compared to other countries.

….an entry fee is probably preferable to open gates. People disagree whether immigrants are a net cost. They will continue to do so once the borders are open. Even if immigrants are a net cost on society (which I don’t believe they are), those costs are debatable and largely hidden. Making immigrants a transparent and immediate revenue source makes them much more desirable to politicians and voters.

Filed under: Economics

Gary Becker’s Immigration Plan
Adam Ozimek
Thu, 14 Apr 2011 00:36:38 GMT

This plan could reduce the opposition to immigration and allow its gains to be achieved.  However, I think we should still allow allocation of immigration slots to those who are coming for political, family or hardship reasons.

Most Livable Cities

 

The Economist magazine recently came out with its 2011 ranking of the World’s most `livable cities’. Not a single US city makes the top 10. Calgary in Canada is number five, Helsinki is number 6 etc. What is surprising is the approach adopted by the writers at the Economist. Identify a list of appealing attributes, rate the cities on each of them and then aggregate the ratings. Very Soviet. Why not ask people where they would rather live? I would be surprised if Calgary made it to the top ten. Now that I think about it, I wish the Economist would put nose to grindstone and do something really useful. Estimate the economic inefficiency caused by the fact that most people are forced to work in the countries of their birth. The magazine is keen on free trade in oranges and cotton, why not people? Open borders, full mobility. Hmmm, when next Mr. Obama meets the Indian PM, instead of complaining about outsourcing stealing American jobs, he should be pressing the Indian government to allow American’s to follow those jobs to India. In addition he should be railing against the impediments the government of India places on the outsourcing of higher education to the US. Why stop with India? Why not…………

Most Livable Cities
rvohra
Thu, 24 Feb 2011 19:33:43 GMT

More Immigration to fix Social Security: What can we do about spending as a percent of GDP?

Immigration also would create a market for our huge empty housing stock.

Ezra Klein has a post where he calls the balanced budged constitutional amendment Republicans are pushing and calls it both terrible policy and dangerous. I haven’t read the actual amendment or taken a close look at it, but based on Ezra’s description I’m tempted to agree with him. But that’s not why I’m writing. I’m writing because I want to disagree with this statement of his:

But the problem isn’t simply that the proposed amendment is extreme. It’s also unworkable. The baby boomers are retiring and health costs are rising. Unless you have a way to stop one or the other from happening — and no one does — spending as a percentage of GDP is going to have to rise.

While economists may disagree about the fiscal impacts of past immigration, there is a general agreement that higher skilled immigrants have a positive impact on government budgets.  Part of our long-term budget problem is demographic, so, as Rick Santorum so usefully implied, we should be letting in more immigrants who are on average younger in order to counteract our country’s aging (that was Santorum’s intended point, right?). Also, more immigrants also allow us to spread the fixed defense costs over a more people, and lower defense spending as a percent of GDP. Illegal immigrants are even better from a budgetary standpoint, since they frequently contribute to social security but don’t take out of it, and have thus put around $120 to $240 billion into the system. So what we really need is a massive influx of highly skilled illegal immigrants.

Filed under: Society

What can we do about spending as a percent of GDP?
Adam Ozimek
Fri, 01 Apr 2011 22:43:03 GMT

How to react to a clumsy, but scary fake??

This either will make you laugh, fly into a rage or cry.  The photo is supposed to provoke “A how dare those illegal immigrants demand anything of us” moment.  Trouble is it reeks of fakeness, as does the whole site.

First the sentiment is so over the top, that it is hard to believe anyone advocating for illegals would use such a sign to engender support for their cause.  Isn’t that obvious?  If you’re going to fake something make it plausible.  This isn’t.

Second, there are ample reasons to suspect a photographic fake.  Why are all these US flags in the background?  How does that jive with this sign?  Note the top part of the sign is wider than the bottom, and the color of the posterboard seems to not be consistent.  All in all at least the top of sign has been photoshopped in.

The bottom is pretty disturbing as well, and I’m more inclined to think it is real.    I think you could read its as an assertion of second amendment rights, as many are fond of doing these days.   If you look at other photos on the site you see a lot of other photos that are more obvious fakes, such as Al Gore with horns etc.  (Be warned much of the material there is pretty offensive.)  So the author is fond of doctored photos. At least the top is fake to rile up the maximum right wing ire.

It seems outrageous that someone feels such a need to stir the pot against people who do dirty, hard, thankless and low paying jobs for him.  Maybe he wants to clean his own restrooms, but I doubt it.

All in all you can laugh at this for its clumsiness, become angry at its lies, or cry that someone would feel the need to stoke even more xenophobia.