Immigration Surplus Research Articles

Endogenous Immigration, Human and Physical Capital Formation, and the Immigration Surplus

We evaluate the economic consequences of immigration in a two-country, two-skill, overlapping-generations framework, where immigration, population, human and physical capital formation, and economic growth are endogenous variables. We go beyond extant literature by integrating physical capital in our model. This enables the derivation of new insights about the induced-immigration effects of exogenous triggers, including pull and push factors and policy variables, on the dynamic evolution of the “immigration surplus” in the short run versus the long run, in destination vs. source countries and in the global economy. The policy shifts we analyze include the easing of constraints on potential migrants’ labor and physical capital mobility, and the role of physical capital endowments. We also discuss the policy implications of asymmetries in the net benefits from immigration across destination and source countries. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Endogenous Immigration, Human and Physical Capital Formation, and the Immigration Surplus

Endogenous Immigration, Human and Physical Capital Formation, and the Immigration Surplus

Labour Market Inclusion of International Protection Applicants and Beneficiaries

IntroductionLabour market inclusion of international protection applicants and beneficiaries represents an important issue of migration and integration policies of various EU Member States.Strielkowski (2012) and Milaszewicz et al. (2015) show that immigrants often choose host countries according to the ability to absorb an additional labour supply that they constitute. As a result, certain EU Member States experience the influx of the large amount of immigrants that might potentially cause disturbances on their labour markets. The stakeholders and migration policy-makers, as well as labour associations, trade unions and members of general society confront the constant dilemma of allowing migrants to enter their respective countries and facing consequences that might follow including social unrests, unease, the rise of populism and xenophobia. With regard to the above, there is no wonder that the recent Brexit campaign recently waging in the United Kingdom and shaking up the political and economic scenes prior to the referendum held on the 23rd of June 2016 was largely drawing from the fears of migration and flooding the UK labour market (Vasilopoulou, 2016). In fact, the Brexiteers used migration as their main card a week or two before the day of the referendum trying to tip the vote to their side. It is ironic that possible consequences of Brexit might turn this debate around. According to the Office of National Statistics (2011), in 2011 alone, 2.68 million people born in other EU countries resided in the United Kingdom. This number reached 3.03 million by 2014 (Office of National Statistics, 2014). In the same time, there might be from 1.2 to almost 3 million people born in the UK or having the UK passport who live and work in other EU countries (Parliament, 2016). What might follow would be naturalization of migrants on either sides or the massive exodus if all other measures and solutions fail to resolve the situation.A common concern about the phenomenon of international migration that might shape the policies and the public attitudes is the common perception that migrants come into a country without any contribution to society and that they might only take the advantage of the conditions local labour markets and welfare states offer.In order to measure levels of integration and labour market inclusion, Migrant Integration Policy Index (MIPEX) is often employed (Niessen et al., 2010). The MIPEX is a tool that allows measuring and comparing diverse levels of integration with regard to different migration policy areas such as labour market mobility, education and access to long term residence, among other things. With the data contained in this index, the impact of integration in the might be explained and then used to generate advices that might improve integration and thus enhance economic benefits for local economy.The rest of this paper is structured as follows: Section 1 describes the situation with the international protection in the Czech Republic. Section 2 discusses the Czech migration policy and provisions with regard to the international protection applicants and beneficiaries. Section 3 analyses the issues of immigration surplus and MIPEX for the particular case of the Czech Republic. Finally, Section 4 summarizes the main findings and provides brief conclusions and policy implications.1. International protection regimes in the Czech RepublicThe Czech Republic has never been a very popular country for international migrants (except for the Ukrainians, Vietnamese of the citizens of the neighbouring Poland and Slovakia). Moreover, the number of applications for international protection in the Czech Republic has never been high in comparison with the other EU countries.In 2015, foreign nationals filed 1525 applications for international protection in the Czech Republic. The asylum was granted to 71 people and 399 people were put under the supplementary procedure (permission to stay in the country for a period from 1 to 3 years). …

Migration in post-transition economies: immigration surplus in Visegrad group countries

This paper tackles studies international migration and its positive effects in the post-transition economies of the Central and Eastern Europe. Generally, economic theory agrees that immigration either has a positive impact on the economic welfare of the target countries or its effect is relatively small. This paper attempts to advocate the idea that the economic impact of migration is positive. In addition, it calculates the so-called 'immigration surplus' for the Visegrad group post-communist economies in transition. The overall conclusion is that migration, although it is modest in its volume and scope, is very beneficial for the countries in question and therefore should be considered by the relevant stakeholders as one of the tools for fostering economic development.

Understanding the Impact of Immigration on Crime

Since the 1960s both crime rates and the share of immigrants among the American population have more than doubled. Almost three quarters of Americans believe immigration increases crime, yet existing academic research has shown no such effect. Using panel data on US counties from 1980 to 2000, this paper presents empirical evidence on a systematic and economically meaningful impact of immigration on crime. Consistent with the economic model of crime this effect is strongest for crimes motivated by financial gain, such as motor vehicle theft and robbery. Moreover, the effect is only present for those immigrants most likely to have poor labor market outcomes. Failure to account for the cost of increased crime would overstate the “immigration surplus” substantially, but would most likely not reverse its sign.

The immigration surplus and the substitutability of immigrant and native labor: evidence from Spain

How immigration affects the labor market of the host country is a topic of major concern for many immigrant-receiving nations. Spain is no exception, as a consequence of the rapid increase in immigrant flows experienced over the past few decades. We assess the impact of immigration on Spanish natives’ incomes by estimating the net immigration surplus (IS) under the assumption of perfect and imperfect substitutabilities between immigrant and native labor of similar educational attainment. To address the imperfect substitutability between immigrant and native labor, we use information on the occupational distribution of immigrants and natives of similar educational attainment to learn about the equivalency of skilled immigrants to skilled and unskilled natives. The results show that the magnitude of the IS significantly rises with the degree of imperfect substitutability between immigrant and native labor.

Labour Migration and Remittances: Current Trends in Times of Economic Recession

This paper introduces certain trends and links between labour migration and remittances, during the current global economic crisis. Based on available data, it can be stated that the current economic crisis has had/will have a short-term impact on remittance transfers to the developing regions that are dominant receivers of this type of financial resource. Remittances clearly represent the most stable source of finances for stimulating development in poor countries, in comparison with other potential sources for financing development, even in times of economic recession or crisis and at both regional and global levels. Moreover, in harmony with Borjas’ (1994) concept, an analysis of “immigration surplus” was carried out. It clearly shows that labour migration does not constitute a burden for the economy of a relatively small Central European country, such as Czechia, and that the overall effect for the target economy is positive.

Understanding the Impact of Immigration on Crime

Since the 1960s both crime rates and the share of immigrants among the American population have more than doubled. Almost three quarters of Americans believe immigration increases crime, yet existing academic research has shown no such effect. Using panel data on US counties from 1980 to 2000, this paper presents empirical evidence on a systematic and economically meaningful impact of immigration on crime. Consistent with the economic model of crime this effect is strongest for crimes motivated by financial gain, such as motor vehicle theft and robbery. Moreover, the effect is only present for those immigrants most likely to have poor labor market outcomes. Failure to account for the cost of increased crime would overstate the “immigration surplus” substantially, but would most likely not reverse its sign.

Unemployment and the Immigration Surplus

Within a small open economy fair wage model with unemployment of unskilled workers, we show that exogenous unskilled immigration increases the welfare of natives if the elasticity of the inverse labour demands exceeds a positive finite threshold. This threshold depends positively on the displacement ratio of native workers by immigrants and negatively on the share of immigrants in the unskilled workforce.

Unproductive immigrants: A socially optimal policy for rational egalitarians

Large parts of the population of third-world immigrants to rich countries have not been successfully integrated into domestic labor markets and so are not productively employed. A potential “immigration surplus” has therefore not been realized. These circumstances have been explained with reference to irrational behavior by natives (acting out of racism) and/or malevolent motives of either natives or immigrants, or both. In this paper, I propose an explanation for labor-market exclusion of immigrants as the optimal outcome of objectives of rational egalitarianism: that is, all people are rational and behave solely in accord with ethical socially irreproachable motives. The explanation fits the stylized facts of the Danish case. The predictions are also consistent with observed inter-country differences in labor-market exclusion of immigrants.

Can International Migration Ever Be Made a Pareto Improvement?

We argue that compensating losers is more difficult for immigration than for trade and capital movements. While a tax-cum-subsidy mechanism allows the government to turn the gains from trade into a Pareto improvement, the same is not true for the so-called immigration surplus, if the redistributive mechanism is not allowed to discriminate against migrants. We discuss policy conclusions to be drawn from this fundamental asymmetry between migration and other forms of globalization.

Does Immigration Raise Natives Income? National and Regional Evidence from Spain

How immigration affects the labor market of the host country is a topic of major concern for many immigrant-receiving nations. Spain is no exception following the rapid increase in immigrant flows experienced over the past decade. We assess the impact of immigration on Spanish natives’ income by estimating the net immigration surplus accruing at the national level and at high immigrant-receiving regions while taking into account the imperfect substitutability of immigrant and native labor. Specifically, using information on the occupational densities of immigrants and natives of different skill levels, we develop a mapping of immigrant-to-native self-reported skills that reveals the combination of natives across skills that would be equivalent to an immigrant of a given self-reported skill level, which we use to account for any differences between immigrant self-reported skill levels and their effective skills according to the Spanish labor market. We find that the immigrant surplus amounts to 0.04 percent of GDP at the national level and it is even higher for some of the main immigrant-receiving regions, such as Cataluna, Valencia, Madrid, and Murcia.

Capital–skill complementarity and the immigration surplus

We build a neoclassical growth model with overlapping dynasties and capital–skill complementarities to evaluate changes in immigration policy. Calibrating the model using US data, we quantify the differential effects of skilled and unskilled immigration on factor returns and on the welfare of different sectors of the population. An influx of high-skilled immigrants lowers the wages of skilled workers, raises the wages of unskilled workers, and because of the relative complementarity between capital and skilled labor, substantially raises the rate of return to native-owned capital. By contrast, an influx of unskilled immigrants produces an opposite effect on wages, and has only a negligible effect on the return to capital. Because of capital–skill complementarity, an increase in the number of skilled immigrants generates an immigration surplus—the overall welfare benefit accruing to the native population—that is approximately ten times larger than the immigration surplus generated by an identical increase in the number of unskilled immigrants. This differential welfare effect is far higher than can be accounted for by the disparity between the productivities of each type of worker.

IMMIGRATION AND NATIVE WELFARE*

This article unifies two approaches for identifying the welfare and wage effects of immigration, one emphasizing the immigration surplus, the other stressing a potential welfare loss due to a terms‐of‐trade effect. We decompose the native welfare effect into a standard complementarity effect, augmented by a Stolper–Samuelson effect, and a terms‐of‐trade effect. We illustrate the welfare and wage effects of endogenous goods prices in a stylized‐specific factors model. Finally, we calibrate this model to a generic OECD economy and provide simulation results. The key insight is that endogenous goods prices play a quantitatively important role, sometimes even overturning received results.

THE IMMIGRATION SURPLUS REVISITED IN A GENERAL EQUILIBRIUM MODEL WITH ENDOGENOUS GROWTH*

ABSTRACT We revisit the influential work of Borjas (1995) on the economic gain to the host population from immigration—“the immigration surplus.” We develop his analysis by using a general equilibrium endogenous growth model with endogenous capital and several sectors, including an R&D sector driving growth. Skilled immigration leads to a bigger R&D sector share resulting in higher long‐term growth. If skilled labor and physical capital are complements, this growth gain increases. Growth effects on the immigration surplus dominate the purely static effects of Borjas, but are not sufficient to eliminate the emergence of losers (skilled natives) within the host population.

Aspects of International Fragmentation

AbstractThe paper uses a specific‐factors framework to address efficiency and distributional implications of international fragmentation which is driven by a low foreign wage rate. Focusing on the cost‐savings linkage between fragmentation and labor demand in the remaining domestic activities, the author establishes a fragmentation surplus. If capital is an indivisible asset specific to the fragment produced abroad, then fragmentation may cause a domestic welfare loss, because outsourcing takes place in discrete steps where it affords firms “quasi‐market‐power” on the domestic labor market. The regime shift from domestic production to fragmentation is modeled as a two‐stage game. In stage one, firms locate indivisible assets at home or abroad; in stage two they choose optimal employment. The share of fragmented firms is endogenously determined. The paper explores conditions under which outsourcing is beneficial for the domestic economy.

Immigration and Native Welfare

We unify two approaches towards identifying native welfare effects of immigration, one emphasizing the immigration surplus (Borjas, 1995, 1999), the other identifying a welfare loss due to terms-of-trade effects (Davis & Weinstein, 2002). We decompose the native welfare effect of immigration into the standard complementarity effect, augmented by a Stolper-Samuelson effect, and a terms-of-trade effect. Using a structural model with three skill-classes we derive propositions on the wage and native welfare effects of various immigration scenarios. A calibration-based simulation reveals that the size of the inflow and immigrant income repatriation are key determinants of the welfare-ranking of different immigration scenarios.

A Note on the Redistributive Effect of Immigration

In this paper, we study gains and losses that accrue to natives because of immigration. The gain on the aggregated level is called the ‘immigration surplus’, which can be seen as analogous to a consumer surplus. We derive changes in the earnings of native owners of production factors by employing a stylized model with capital and two types of labour. We claim that the changes in earnings are larger than reported by previous studies, and we propose a new method to tally them up to the immigration surplus.

Aspects of International Fragmentation

This paper uses a specific-factors model incorporating two sectors, in order to explore the efficiency and distributional consequences of international disintegration of production. The economy faces a neighboring region where the wage rate is lower than obtaining in the domestic economy under integrated production, which gives rise to an incentive for outsourcing. Assuming that is takes place in only one of the two sectors, we show that under perfect markets it gives rise to an outsourcing surplus which is analogous to the immigration surplus. However, in contrast to the case of immigration, the gain from is the larger, the smaller the associated redistribution to the disadvantage of labor. However, if the activity which is lost to involves a fixed input, then may cause a welfare loss and the domestic wage rate may fall below the foreign level. The paper identifies conditions that lead to this outcome. The case is analyzed as a two-stage game where firms decide on the strategy in stage one, and then behave competitively in their respective labor markets in stage two.

The educational attainment of second-generation immigrants in The Netherland

Since the mid-1960's the Netherlands has had an immigration surplus, mainly because of manpower recruitment from Turkey and Morocco and immigration from the former Dutch colony of Surinam. Immigrants have a weak labor market position, which is related to their educational level and language skills. Children and grandchildren of immigrants are expected to have a better chance of integration into Dutch society. In this paper we investigate whether this is true with respect to the educational attainment of second generation immigrants from Turkey, Morocco, Surinam and the Dutch Antilles.