Low-skilled Natives Research Articles

The Effect of E-Verify Laws on Crime

E-Verify laws, which have been adopted by 23 states, require employers to verify whether new employees are eligible to legally work prior to employment. This study explores the impact of state E-Verify laws on crime. Using data from the 2004–2015 National Incident Based Reporting System, the authors find that the enactment of E-Verify is associated with a 7% reduction in property crime incidents involving Hispanic arrestees. This finding was strongest for universal E-Verify mandates that extend to private employers and its external validity bolstered by evidence from the Uniform Crime Reports. Supplemental analyses from the Current Population Survey suggest two mechanisms to explain this result: E-Verify-induced increases in the employment of low-skilled natives of Hispanic descent and out-migration of younger Hispanics. Findings show no evidence that arrests were displaced to nearby jurisdictions without E-Verify or that violent crime or arrests of African Americans were affected by E-Verify laws. The magnitudes of the estimates suggest that E-Verify laws averted $491 million in property crime costs to the United States.

Does Labor Protection Increase Support for Immigration? Evidence from Switzerland

What affects native support for immigration? At a time of rising anti-immigration sentiments, this is a question raised by both academics and policy makers. We study the role of labor protection in shaping native preferences over migration policies. We look at Swiss national votes which took place from 2000 to 2014. Our results show that a higher immigrant exposure reduces pro-immigration vote shares in municipalities with a relatively low-skilled native population. The negative response is mitigated under higher levels of labor protection as measured by collective bargaining coverage. We look at labor market outcomes to understand mechanisms at play and find some suggestive evidence that collective agreements mitigate negative wage responses among low-skilled natives. Overall, the analysis suggests that labor protection affects vote outcomes by improving in addition other labor market conditions or by alleviating existing fears among the native population.

How Do Low-Skilled Immigrants Adjust to Chinese Import Shocks? Evidence Using English Language Proficiency

This paper examines the link between trade-induced changes in local labor market opportunities and English language fluency rates among low-skilled immigrants in the United States. Many of the production-based manufacturing jobs lost in recent years due to Chinese import competition did not require strong English-speaking skills while many of the jobs in expanding industries, mostly in the service sector, did. Consistent with responses to these changing labor market opportunities, we find that a $1,000 increase in import exposure per worker in a local area led to an increase in the share of low-skilled immigrants speaking English very well in that area by about half a percentage point. As evidence that at least part of this is a result of actual improvements in English language speaking abilities, we show that low-skilled immigrants in trade-impacted areas became especially likely to be enrolled in school compared to similarly low-skilled natives. However, while we find little support for selective domestic migration in response to trade shocks, we present evidence suggesting that new immigrants arriving from abroad choose where to settle based either on their English fluency or their ability to learn English. Regardless of whether low-skilled immigrants respond to trade shocks via actual improvements in English fluency or migration choices, our results suggest that immigrants help to equilibrate labor markets, an implication we find evidence for in the data.

IMMIGRATION, ENDOGENOUS SKILL BIAS OF TECHNOLOGICAL CHANGE, AND WELFARE ANALYSIS

This paper investigates the long-run effects of immigration on wages and welfare in a model with endogenous technology choice (ETC) where firms are allowed to choose their optimal skill intensity from a menu of available technologies. I embed the ETC framework into the Auerbach and Kotlikoff model (1987) that features a large set of overlapping generations, a rich collection of population dynamics, and a social security system. I calibrate the model to match with the U.S. data and evaluate the effect of ETC with the help of two experiments. In the first experiment, I increase the share of high-skilled immigrants and compare the wage and welfare predictions of the model with ETC to a standard model where the skill intensities in production technology are fixed. In the standard model, since the skill intensities are constant, increase in the supply of high-skilled labor leads to a decrease in high-skilled wages and an increase in low-skilled wages. On the other hand, in the model with ETC, negative supply-side effects are counterbalanced by an increase in the intensity of the more abundant high-skilled labor, leading to a smaller decrease in their wages. The discrepancy between wage predictions of these two models is also reflected in the welfare: while the model with ETC predicts an increase in both high- and low-skilled natives’ welfare, the standard model would predict a decrease in the welfare of the high skilled and a larger increase in the welfare of the low skilled. In the second experiment, I examine the effects of an increase in low-skilled immigration and find that in this case, since the initial production technology is low-skilled intensive, the ETC effects are smaller. These results imply that if ETC is ignored, both in the short run and long run, wage and welfare analyses of immigration will be incomplete, and even misleading.

Should Germany have built a new wall? Macroeconomic lessons from the 2015-18 refugee wave

In 2015–2016 Germany experienced a wave of predominantly low-skilled refugee immigration. We evaluate its macroeconomic and distributional effects using a quantitative overlapping generations model calibrated using German micro data to replicate education and productivity differentials between foreign born and native workers. Workers are modelled as imperfect substitutes in aggregate production leading to endogenous wage differentials. We simulate the dynamic effects of this refugee wave, with specific focus on the welfare impact on low skilled natives. Our results indicate that the small losses this group suffers can be compensated by welfare gains of other parts of the native population.

Should Germany Have Built a New Wall? Macroeconomic Lessons from the 2015-18 Refugee Wave

In 2015-2016 Germany experienced a wave of predominantly low-skilled refugee immigration. We evaluate its macroeconomic and distributional effects using a quantitative overlapping generations model calibrated using German micro data to replicate education and productivity differentials between foreign born and native workers. Workers are modelled as imperfect substitutes in aggregate production leading to endogenous wage differentials. We simulate the dynamic effects of this refugee wave, with specific focus on the welfare impact on low skilled natives. Our results indicate that the small losses this group suffers can be compensated by welfare gains of other parts of the native population. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Unequal migration and urbanisation gains in China

We assess the role of internal migration and urbanisation in China on the nominal earnings of three groups of workers (rural migrants, low-skilled natives, and high-skilled natives). We estimate the impact of many city and city-industry characteristics that shape agglomeration economies, as well as migrant and human capital externalities and substitution effects. We also account for spatial sorting and reverse causality. Location matters for individual earnings, but urban gains are unequally distributed. High-skilled natives enjoy large gains from agglomeration and migrants at the city level. Both conclusions also hold, to a lesser extent, for low-skilled natives, who are only marginally negatively affected by migrants within their industry. By contrast, rural migrants slightly lose from migrants within their industry while otherwise gaining from migration and agglomeration, although less than natives. The different returns from migration and urbanisation are responsible for a large share of wage disparities in China.

Unequal Migration and Urbanisation Gains in China

We assess the role of internal migration and urbanisation in China on the nominal earnings of three groups of workers (rural migrants, low-skilled natives, and high-skilled natives). We estimate the impact of many city and city-industry characteristics that shape agglomeration economies, as well as migrant and human capital externalities and substitution effects. We also account for spatial sorting and reverse causality. Location matters for individual earnings, but urban gains are unequally distributed. High-skilled natives enjoy large gains from agglomeration and migrants at the city level. Both conclusions also hold, to a lesser extent, for low-skilled natives, who are only marginally negatively affected by migrants within their industry. By contrast, rural migrants slightly lose from migrants within their industry while otherwise gaining from migration and agglomeration, although less than natives. The different returns from migration and urbanisation are responsible for a large share of wage disparities in China.

The Effect of E-Verify Laws on Crime

E-Verify laws, which have been adopted by 23 states, require employers to verify whether new employees are eligible to legally work prior to employment. In the main, these laws are designed to reduce employment opportunities for unauthorized immigrants, reduce incentives for their immigration, and increase employment and earnings for low-skilled natives. This study explores the impact of state E-Verify laws on crime. Using agency-by-month data from the 2004 to 2015 National Incident Based Reporting System (NIBRS), we find that the enactment of E-Verify is associated with a 5 to 10 percent reduction in property crimes involving Hispanic arrestees, an effect driven by universal E-Verify mandates that extend to private employers. Supplemental analyses from the Current Population Survey (CPS) suggest that E-Verify-induced increases in employment of low-skilled natives of Hispanic descent, and outmigration of younger Hispanics are important channels. We find no evidence that crime was displaced to nearby U.S. jurisdictions without E-Verify or that violent crime was impacted by E-Verify mandates. Moreover, neither arrests nor labor market outcomes of white or African American adults were affected by E-Verify laws. The magnitudes of our estimates suggest that E-Verify mandates generated $491 million in social benefits of reduced crime to the United States.

Labour Market Responses to Immigration: Evidence from Internal Migration Driven by Weather Shocks

We study the labour market impact of internal migration in Indonesia by instrumenting migrant flows with rainfall shocks at the origin area. Estimates reveal that a one percentage point increase in the share of migrants decreases income by 0.97% and reduces employment by 0.24 percentage points. These effects are different across sectors: employment reductions are concentrated in the formal sector, while income reduction occurs in the informal sector. Negative consequences are most pronounced for low-skilled natives, even though migrants are systematically highly skilled. We suggest that the two-sector nature of the labour market may explain this pattern.

Immigration, Search and Redistribution: A Quantitative Assessment of Native Welfare

We study the eects of immigration on native welfare in a general equilibrium model featuring two skill types, search frictions, wage bargaining, and a redistributive welfare state. Our quantitative analysis suggests that, in all 20 countries studied, immigration attenuates the eects of search frictions. These gains tend to outweigh the welfare costs of redistribution. Immigration has increased native welfare in almost all countries. Both high-skilled and low-skilled natives benet in two thirds of countries, contrary to what models without search frictions predict. Median total gains from migration are 1.19% and 1.00% for high and low skilled natives, respectively.

Experimental Evidence for a Link between Labor Market Competition and Anti-Immigrant Attitudes

Anti-immigrant sentiment has become central to politics in Western Democracies yet researchers disagree about its causes. Experimental studies claim to disprove the labor market competition (LMC) hypothesis of anti-immigrant attitudes because high-skilled workers should prefer low-skilled immigrants who do not compete with them, but actually prefer high-skilled immigrants. However, these studies do not account for high-skilled natives' skill specificity which protects them from immigrant competition unlike low-skilled natives. I present a survey experiment with an equal LMC treatment for all skill levels: respondents' actual occupations. The results support the LMC hypothesis: high-skilled natives are 0.27 less favorable towards immigrants in their occupation than other high-skilled immigrants (on a 1-7 scale), comparable to their preference against low-skilled immigrants (0.3 lower). I find low-skilled natives perceive all low-skilled immigration as threatening whereas high-skilled natives only feel threatened by immigration in their occupation, showing LMC contributes to anti-immigrant sentiment.

Time-consistent immigration policy under economic and cultural externalities

Discussions of immigration policy are typically framed in the context of their economic effects in receiving countries, notably labour market and fiscal effects. In this paper, we characterize immigration policy in a richer model where migrants are also a source of cultural externalities stemming from either preferences or the functioning of formal and informal institutions in receiving countries. While in terms of pure economic effects, immigrants do not generally have any more incentives than low-skilled natives to allow for more immigration in the future, this is not the case when accounting for cultural externalities. Therefore, insofar as past immigrants have a voice in affecting future policies, a time-consistent immigration policy entails back-loading; as natives attempt at limiting voice of immigrants in the future, the economic effects of immigration flows as well as the cultural externality they introduce. Furthermore, natives exploit any pre-commitment device to limit immigration flows, e.g. building ‘‘walls’’, limiting immigrants’ political rights, or accumulating fiscal surpluses.

The labor market effects of reducing the number of illegal immigrants

A controversial issue in the US is how to reduce the number of illegal immigrants and what effect this would have on the US economy. To answer this question we set up a two-country model with search in labor markets and featuring legal and illegal immigrants among the low skilled. We calibrate it to the US and Mexican economies during the 2000–2010 period. As immigrants – especially illegal ones – have a worse outside option than natives, their wages are lower. Hence, their presence reduces the labor cost of employers who, as a consequence, create more jobs per unemployed when there are more immigrants. Because of such effects our model shows increasing deportation rates and tightening border control weakens low-skilled labor markets, increasing unemployment of native low-skilled workers. Legalization, instead, decreases the unemployment rate of low-skilled natives and increases income per native.

Immigration, Endogenous Technology Choice and Welfare Analysis

This paper analyzes the long run welfare effects of immigration in a model with endogenous technological change. Existing theoretical models predict that immigration would depress the wages while empirical findings show insignificant wage effects of immigration. In order to match the theory with empirical findings, I embed endogenous technological change in a model similar to Auerbauch and Kotlikoff (1987) and compare it with a baseline model where firms have constant production technology. First, I find that 2% increase in high-skilled immigrants in a model without endogenous technology choice high-skilled native wages would decrease by 10.4% while low-skilled native wages would go up by 7.4%. On the contrary, in a model with endogenous technology choice, high-skilled native wages will decline only by 1.3% and low-skilled native wages will increase only by 0.2%. Second, the model without endogenous technology choice would predict a negative welfare effect of high-skilled immigration on the high-skilled natives and a positive and bigger (74% higher) effect on the low-skilled natives. On the contrary, the model with endogenous technology choice predicts that high-skilled immigration will increase the welfare of both high-skilled and low skilled natives. Specifically, welfare effect of high-skilled immigration on skilled natives are 109% higher when endogenous technology is allowed as compared to the baseline model without endogenous technology choice. These results imply that if endogenous technology choice is not taken into account, the long run analysis of immigration on the welfare and the economy will be incomplete and even misleading.

Immigrants' Effect on Native Workers: New Analysis on Longitudinal Data

Using longitudinal data on the universe of workers in Denmark during the period 1991–2008, we track the labor market outcomes of low-skilled natives in response to an exogenous inflow of low-skilled immigrants. We innovate on previous identification strategies by considering immigrants distributed across municipalities by a refugee dispersal policy in place between 1986 and 1998. We find that an increase in the supply of refugee-country immigrants pushed less educated native workers (especially the young and low-tenured ones) to pursue less manual-intensive occupations. As a result immigration had positive effects on native unskilled wages, employment, and occupational mobility. (JEL J15, J24, J31, J61, J62)

Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis

How does the US labor market absorb low-skilled immigration? In the short run, high-immigration locations see their low-skilled labor force increase, native low-skilled wages decrease, and the relative price of rentals increase. Internal relocation dissipates this shock spatially. In the long run, the only lasting consequences are (a) worse labor market conditions for low-skilled natives who entered the labor force in high-immigration years, and (b) lower housing prices in high-immigrant locations, when immigrant workers disproportionately enter the construction sector and lower construction costs. I use a quantitative dynamic spatial equilibrium many-region model to obtain the policy-relevant counterfactuals.

Immigrants' Effect on Native Workers: New Analysis on Longitudinal Data

Using longitudinal data on the universe of workers in Denmark during the period 1991-2008 we track the labor market outcomes of low skilled natives in response to an exogenous inflow of low skilled immigrants. We innovate on previous identification strategies by considering immigrants distributed across municipalities by a refugee dispersal policy in place between 1986 and 1998. We find that an increase in the supply of refugee-country immigrants pushed less educated native workers (especially the young and low-tenured ones) to pursue less manual-intensive occupations. As a result immigration had positive effects on native unskilled wages, employment and occupational mobility.

Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis

How does the US labor market absorb low-skilled immigration? I address this question using the 1995 Mexican Peso Crisis, an exogenous push factor that raised Mexican migration to the US. In the short run, high-immigration states see their low-skilled labor force increase and native low-skilled wages decrease, with an implied local labor demand elasticity of -.7. Internal relocation dissipates this shock spatially. In the long run, the only lasting consequences are for low-skilled natives who entered the labor force in high-immigration years. A simple quantitative many-region model allows me to obtain the counterfactual local wage evolution absent the immigration shock.

Immigration, Search, and Redistribution: A Quantitative Assessment of Native Welfare

We study the effects of immigration on native welfare in a general equilibrium model featuring two skill types, search frictions, wage bargaining, and a redistributive welfare state. Our quantitative analysis suggests that, in all 20 countries studied, immigration attenuates the effects of search frictions. These gains tend to outweigh the welfare costs of redistribution. Immigration has increased native welfare in almost all countries. Both high-skilled and low-skilled natives benefit in two thirds of countries, contrary to what models without search frictions predict. Average total gains from immigration are 1.25% and 1.00% for high and low skilled natives, respectively.