Abstract
We examine how immigration affects natives’ relative prime-age labor market outcomes by economic class background, with class background established on the basis of parents’ earnings rank. Exploiting alternative sources of variation in immigration patterns across time and space, we find that immigration from low-income countries reduces intergenerational mobility and thus steepens the social gradient in natives’ labor market outcomes, whereas immigration from high-income countries levels it. These findings are robust with respect to a wide range of identifying assumptions. The analysis is based on high-quality population-wide administrative data from Norway, which is one of the rich-world countries with the most rapid rise in the immigrant population share over the past two decades. Our findings suggest that immigration can explain a considerable part of the observed relative decline in economic performance among natives with a lower-class background.
Highlights
This paper provides an empirical analysis of the relationship between immigration and intergenerational economic mobility within a native population
While the focus on predetermined family background as the key distinguishing feature of natives solves some methodological problems, it provides the most direct route toward answering the research question addressed in this paper: Can recent immigration patterns explain why lower class individuals have fallen systematically behind in economic outcomes over the past few decades? Our findings suggest that the answer to this question is yes: Immigration has played an important role in the steepening of the social gradient in labor market outcomes among natives
In line with expectations built on economic theory, our results show that exposure to immigration from low-income countries steepens the social gradients in all three outcomes, whereas exposure to immigration from high-income countries levels them
Summary
This paper provides an empirical analysis of the relationship between immigration and intergenerational economic mobility within a native population. Since family background is observed for complete birth cohorts, we can examine impacts on all natives and include prime-age employment status as an outcome of interest This is potentially important, as recent research has indicated much larger immigration effects on employment than on wages in a setting similar to the one analyzed in the present paper (Dustmann et al 2017). While our study does not examine the impacts of immigration on attitudes or voting behavior directly, it arguably indicates that the historically large influx of migrants from low- to high-income countries, by reducing economic mobility and steepening the social gradient in native outcomes, has laid the foundation for a more polarized political environment in the host countries
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